Most homeowners have an escrow account with their mortgage. Simply put, escrow is a money reserve you conveniently pay into each month along with your mortgage payment. Your mortgage servicer collects the money and holds it in an escrow account for you.
When taxes and insurance are due, they make the payments for you.
So, How Does Escrow Work?
Your mortgage provider estimates the amount to be paid for your real estate tax and homeowners insurance bills.
Each year, they analyze your account, referred to as an Escrow Analysis, to make sure you’re contributing enough to maintain the minimum required balance. Because it’s based on an estimate – and tax and insurance costs change over time – your account may have a shortage or surplus.
What If You Pay Too Much? Or Too Little?
If there’s an escrow surplus, you may receive a check for the surplus amount. If there’s an escrow shortage, it is typically spread over a period of 12 months along with your regular payment. You can also pay the full shortage up front. Either way, your mortgage payment may increase to make sure the account has enough money for the coming year.
Susan Brewer Service First Real Estate (636)936-8600
Published on 2023-05-09 17:32:15
