So you’ve picked out your dream home, selected the paint colors, countertops and cabinets, and now, you are getting ready to select your lender.
You’ve done your research and looked at terms and rates. You’re just trying to choose between your two or three top lenders, when you come across the term “mortgage escrow”.
What is a mortgage escrow account?
Mortgage escrow is a process where additional money beyond a periodic mortgage payment is collected by the lender. The additional money is specifically used to pay taxes and home insurance premiums.
Why would you want a mortgage escrow?
Having a mortgage escrow account with your lender ensures that you will have enough money to pay property taxes and home insurance premiums when they become due. This is kind of like a preventative safeguard so that you won’t have to make extra effort to save every month and pay large lump sums at one time. Since taxes and insurance payments are being collected every month, it’ll already be done for you!
Is having a mortgage escrow account worth it?
If you're a person who has diffiulties saving up for large payments or if you have a tendency to forget to pay bills, a mortgage escrow account could be right for you. Your payment will automatically go up with increases in your local property taxes or even changes in your homeowners insurance policy, making changes in payments seamless for you.
So how do I open a mortgage escrow account when I buy my home?
Different lenders may have different guidelines and regulations concerning mortgage escrow, so be sure to ask about a mortgage escrow when searching for the lender of your choice!