Escrow Accounts

When you have an escrow account, the mortgage company will pay your property taxes and homeowner's insurance for you. When you make your monthly mortgage payment, a portion of the payment goes towards your escrow account. If you look at your statement, you should have a breakdown of how much goes into the escrow account. Always know how much is in your escrow account. If your escrow account goes into the negative, your mortgage payments will go up. The reason your escrow account is in the negative is because you did not have enough money in the account to cover the property taxes and/or homeowner's insurance when the mortgage company made those payments. As a result, the mortgage company increases your monthly payment to make up the difference in the escrow account, and to make sure you have enough money in the account when your taxes and insurance are due again. If you notice that there is a shortage in your escrow account before the mortgage company pays your taxes and insurance, I would recommend that you send in extra money to be put into the escrow account. On the other hand, if you have an overage in the escrow account, the mortgage company will either refund you the overage or keep the money in the escrow account and decrease your monthly payments.



Should you have an escrow account? If you are good with money management, then you can actually set up your own escrow account in the form of a savings account and pay your taxes and insurance on your own. If money management is not one of your strengths, then I would recommend having an escrow account. That way, the mortgage company will pay your taxes and insurance for you, and you do not have to worry about coming up with money when the taxes and insurance are due.