All about Escrow
A Mortgage Escrow Account is like a savings account exclusively
for property taxes, fire or hazard insurance premiums, mortgage
insurance premiums and other escrow items.
An escrow account guarantees you that your payments will be on
time and you will always have enough money when the fees come
up. This saves you the risk of losing your homeowner’s insurance
and/or going into tax debt.
When you have an escrow account, you do not have to pay large
lump sums of cash every time you have a payment of this sort due,
instead you have the money in your account which will be drawn
One advantage of an escrow account besides the obvious is that
you don’t have to worry about unexpected increases. If you
do not have enough for an increase, it is the mortgage company’s
job to cover you. Even when you have not paid the full payment
amount, the lender will take care of your payment and wait for
the money from you.
Not only do escrow accounts help tremendously in managing your
money and getting your payments in on time without the hassle
of finding cash, but these accounts also help lower your mortgage
rate. They can reduce your interest as well as your down payment
and make your entire home loan more simple and convenient.
Escrow accounts are also seen as very safe and secure by investors,
since the accounts promise the investor the money even if the
homeowner does not have money to pay. In a way it is like insurance
to the investor, the homeowner and the lender. No party will be
left without their deserved benefit. Escrow accounts also benefit
local governments by providing a more efficient and less expensive
method of tax collection.