What is a Mortgage Escrow?

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What is a Mortgage Escrow?
By Michelle Doell
When it comes to your mortgage payment you most likely know it’s made up of the principal and interest. What a lot of buyers over look is the third part of that payment, the escrow. It’s this part of the payment that can cause your mortgage to go up or down. This account is set up to make sure you have the money to pay for your homeowner’s insurance, PMI and taxes.
Lenders will require you to have homeowner’s insurance. You can pick the company and the policy as long as it meets the lenders requirements, but the monthly premium payments come from the escrow account. The other portion of the account is property taxes you will pay on the house. When the payment is due, the lender will pay the amount.
The exact amount of escrow will be determined when the final details of the loan are worked out. But here’s how you can determine the amount you should be paying. Call a local insurance agent and get a quote on the house you are thinking of buying then ask your real estate agent for the taxes on the property. Add the two together and then divide by 12. This is roughly what you will pay for your escrow. Keep in mind that this amount will change since property taxes can go up or go down as well as your insurance premium.  Every year your lender will review the amount in escrow to determine if you have enough in the account.  If PMI has to be added, depending on your down-payment, this could affect the total mortgage payment.
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Michelle Doell
Keller Williams Select Realtors
O 443-261-1100
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