Escrow Account Basics
Understanding how escrow accounts work and what they're designed to do.
What is Escrow?
Escrow is a special account where your lender collects and holds funds to pay for property taxes, homeowners insurance, and sometimes mortgage insurance on your behalf.
How Much Do I Pay?
Your monthly escrow payment is calculated by taking your annual property taxes and insurance costs, dividing by 12, then adding a small buffer (typically 2 months) as required by law.
What's Included?
Typically includes property taxes, homeowners insurance, and mortgage insurance (if applicable). Some areas may also include HOA dues or special assessments.
Annual Analysis
Your lender performs an annual escrow analysis to ensure you're paying the right amount. This may result in an escrow shortage, surplus, or no change.
The Escrow Process
Learn about the key steps and timelines involved in managing your escrow account.
Detailed information about the escrow process is coming soon.
What's Included in Escrow?
Here are the common expenses that lenders collect through escrow accounts.
Property Taxes
Annual taxes owed to your local government, typically paid twice per year
Homeowners Insurance
Annual premium for your home insurance policy to protect against damage
Mortgage Insurance
PMI or MIP payments if your loan requires mortgage insurance
HOA Dues (Sometimes)
Homeowners association fees, though not all lenders collect these
Pros & Cons of Escrow Accounts
Understanding the advantages and potential drawbacks of using an escrow account.
Advantages
Considerations
Annual Escrow Analysis
Every year, your lender reviews your escrow account to ensure you're paying the right amount for the upcoming year.
Review Current Costs
Lender analyzes actual costs from the past year for taxes and insurance.
Project Future Costs
Estimate what taxes and insurance will cost for the upcoming year.
Adjust Payment
Your payment may increase, decrease, or stay the same based on the analysis.
