Escrow: taxes, insurance, and peace of mind all rolled into one payment
The word “escrow” is tossed around a lot during the home loan process. Do you want to escrow for taxes and insurance? Do you want escrow for taxes only? Insurance only? What are the benefits of escrow?
An escrow account is an account tied to your mortgage where your mortgage servicer keeps funds in order to pay your homeowners insurance and property taxes. When you make your monthly mortgage payment, a portion of that payment is deposited into the escrow account to sit and wait until those bills are due. These funds are also able to earn interest.
When you escrow for your property taxes and insurance it allows you piece-of-mind that those items are being paid in a timely manner, it also allows you an easy way to set aside the funds needed for those bills without having to think about it. You can make your regular mortgage payment and your bank takes care of the rest.
When you escrow with your mortgage company your payment is going to be adjusted yearly to take into account any changes in premiums for homeowners insurance or changes in property tax amounts. Your mortgage company will send out a statement at the time of the change detailing what your new payment amount will be and if you have an escrow shortage or surplus. In order to avoid any underpayments, make sure you carefully review this statement when it arrives and call with any questions you may have.
Escrow is an easy and convenient way to stay on top of your property taxes and homeowners insurance. If you do not currently escrow but would like to, please contact our servicing department at (207) 782-6871.