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An escrow account sets aside part of your mortgage payment for property-related bills such as taxes and homeowners insurance.
Your mortgage servicer collects money through your payment and uses the escrow account to pay covered bills when due. This spreads large periodic expenses across the year. Escrow requirements depend on your loan and applicable rules.
Property taxes and insurance premiums can change. That can change the escrow portion and total monthly payment even when your mortgage interest rate is fixed. Review the escrow statement and ask the servicer to explain changes in projected bills and the account balance.
Without an escrow account, you must budget for and pay the covered expenses directly. Confirm the amounts and due dates with the relevant taxing authority and insurer. Contact your servicer promptly if a bill appears unpaid or a notice does not match your records.
By Anthony Piccone · 7th Level Mortgage LLC
General information is useful. A mortgage professional can help you evaluate the facts that apply to you.
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