What’s the BIG Deal About Escrow Accounts?

What’s the BIG Deal About Escrow Accounts?

Why do banks encourage borrowers to have an Escrow Account? What is the purposeBanks want to make sure they know that a borrower’s taxes and homeowners insurance is being paid on time…why?

Unpaid taxes will become a priority lien on your property…banks don’t want that to happen. 

If your homeowners insurance policy not in effect due to any issues of non payment, the bank is unprotected against fire and destruction. The home is collateral for the loan. 

What are the pros of an Escrow Account?You don’t have to deal with paying your taxes twice a year and your homeowners insurance once a year

The bank is putting those funds aside for you, and so, they are basically saving the money for you without you having to think about. If you pay taxes and homeowners insurance on your own you’ll have to bite of those big invoices a couple of times a year. Having the escrow account keeps your budget nice and stable. 

What are the Cons of an Escrow Account?Taxes and Homeowners Insurance change every year so it is very possible that annually your mortgage payment will have to adjust a little bit. Some homeowners find this annoying that they have to adjust their autopayments etc. 

The money that you have in your escrow account is setting at the mortgage company bank so you are technically not earning interest on that money. Most of the homeowners that we talk to tell us this is the primary reason why they don’t want to have an escrow account. The interest is so minimal that it really isn’t a good reason in our opinion.