Mortgage Consultants Group

How does the property tax and homeowners insurance escrow account help me?

An escrow account is often required by the lender for protection of collateral.  Borrowers often choose to escrow for peace of mind.  Escrow accounts help with continuity and consistency in payment of property tax and homeowners insurance.   They are generally set us at the loan closing.  A mortgage servicer manages the on-going transactions of the escrow account.

Part of the mortgage payment, as determined at the closing, is held in the escrow account to cover on-going costs related to the property, such as insurance, taxes and other escrow obligations, if applicable.  Since these payments are often due at various dates and intervals, a mortgage servicing/escrow account manages the on-going transactions.

Mortgage servicing helps both the borrower and the lender.  The borrower does not have to worry about keeping track of the due dates, disbursing the payments or coming up with large sums of money to meet irregular payments.  The lessened risk of lapsed insurance or delinquent taxes protects the lender by keeping the collateral secure.

The escrow account will be analyzed annually to determine if the escrow payment needs to be adjusted or if there is a shortage or excess.  Generally, the escrow maintains some predetermined extra amount to ensure timeliness of payments.  If there is an escrow shortage, the borrower will be required to make up the difference.  Excesses will be refunded, if large, or stay in the escrow account to pay future bills.

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