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Application Essentials
Escrow
Accounts
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Application Essentials
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Mortgage escrow accounts are special accounts set up
in which money is held to pay for property taxes, fire and hazard
insurance premiums, mortgage insurance premiums, and other escrow
items. Escrow accounts ensure that these items are paid in a timely
fashion. They are a guarantee that there is always enough money to
pay these bills when they are due so that the homeowner avoids the
risk of lapsed insurance coverage or delinquent taxes.
Guarantee that bills are paid on time.
Homeowners do not have to worry about coming up with several large,
lump sum payments, each with different due dates, throughout the
year.
Unexpected increases are taken care of. It is the
responsibility of the mortgage company to allow for possible
increases in tax or insurance premiums.
Mortgage companies typically cover shortages when tax or
insurance payments increase. It is very common for mortgage
companies to pay taxes and insurance premiums when they are due even
though all the money for these bills has not yet been collected from
the homeowner.
Mortgages have lower rates and downpayments because of
escrows. Escrows protect the interest of investors of home
mortgage loans by making them more attractive and secure as
investments.
Local governments save money. Escrow accounts also benefit
local governments by providing a more efficient, less expensive
means of tax collection.
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