If you are new to the mortgage world, there will be a lot of new terms that will tend to confuse you. In real life, these terms may have different meanings but many frequently used terms have completely different meanings and interpretations in mortgage world.
Escrow account is one such term that is repeatedly used in mortgage world. Escrow accounts are important for mortgage, and will stay with you during the duration of your mortgage so it is important to know everything you can about the mortgage escrow account.
Craig Berry of The Mortgage Reports talks about the escrow accounts in this piece of writing:
All About Mortgage Escrow Accounts For Mortgages
What Is “Escrow”?
When you’re buying a home — whether as a first-time home buyer or an experienced one — there’s a better-than-average chance you’ll encounter confusing jargon, and unfamiliar terms and phrases.
One such term is “escrow”.
Even more confusing is that “escrow” can mean different things depending on where you live.
In California, for example, the phrase “close of escrow” means that a real estate transaction has been completed and the home sale has been made final.
A mortgage escrow means something different.
In mortgages, escrow refers to the accounts used to pay a homeowner’s property taxes and hazard insurance.
But, do not worry! You don’t need to over burden yourself with these technical jargon. Instead, the key is to understand what you need to know and how to utilize it to make the best decisions.
Michele Lerner has highlighted a few important things about escrow accounts here:
Escrow Accounts: What You Need to Know
By Michele Lerner | Jul 31, 2014
With mortgages, homebuyers typically pay extra money into escrow accounts every month, along with their home loan payments.
While a mortgage holder collects the principal and interest payments each month, they also can collect property tax and homeowners insurance payments and pay those bills when they are due. They collect one-twelfth of the estimated annual bill for taxes and insurance each month.
When you borrow money from a lender to finance your home purchase, the property becomes the collateral for your loan. Your lender needs to know that the property is adequately insured so that it can be repaired or replaced if damaged.
The following video by Investors Training Academy is useful in learning about Escrow Accounts:
Learning about escrow accounts and how escrow accounts work will benefit you a lot in making the wise choices regarding mortgage.