If you’re thinking about buying a home and taking out a mortgage, you might have heard the term escrow. Although many people are unfamiliar with the term, having an escrow account is a relatively simple concept. Many mortgage lenders will require you to set up an escrow account in order to ensure that their collateral is secure.
Escrow accounts make it so that if a disaster destroys your home, the lender is reassured that you’ll still be able to pay the remaining balance left on your mortgage loan. This is because an escrow holds and regulates your payment in a secure account to ensure your property taxes and hazard insurance are both paid on time each month.
As a home buyer, you will likely set your escrow account at the time of closing. Your mortgage lender will determine how much money they will require from you to start the account based on your (PITI) Principle payment, monthly Interest payment, annual real estate Tax, and your home Insurance bill.
Escrow accounts are particularly helpful if you as a home buyer find it difficult to save money over periods of time. While in many cases, an escrow account is required, some lenders will let you waive escrow. This often times comes with a fee as well as higher rates the lender will give you compared to homebuyers with an escrow account.
If you’re not sure whether an escrow account is the right decision for you or you have questions regarding escrow, contact one of our agents at...
AZ Insurance Team
*All policies are a little different and this may not be applicable to your insurance policy, talk to your agent to see what your policy covers.*