Most borrowers don't require an escrow account, but having one can help you get the best rate and keep your peace of mind. It may be tempting to opt out of an escrow account to lower your monthly mortgage payment, but it can also give you peace of mind by eliminating your responsibility to make sure those important bills are paid. There are three reasons why some people decide not to use an escrow account and instead pay their taxes and insurance themselves. At the closing of the security deposit, all parties have fulfilled their responsibilities.
The fee for the escrow company's services is generally divided equally between the buyer and the seller. If the analysis of your escrow account determines that they have raised too much money to pay taxes and insurance, they will give you an escrow refund. When you pay your taxes and insurance through an escrow account, you pay the same amount to your mortgage lender every month. Depending on the type of loan and its specific characteristics, you may not have the option of giving up an escrow account.
The amount you should keep in your escrow account depends on your insurance premiums and property taxes, which may vary from year to year. Having an escrow account can also help you get a discount on your interest rate or closing costs from your mortgage lender. When it comes to the latter, some homebuyers are required by their mortgage lender to have an escrow account; others may choose one through their mortgage servicer. Having your lender or mortgage servicer keep your property tax and home insurance payments in custody ensures that those bills are paid on time and automatically.
Your lender or servicing entity must also send you an annual escrow statement showing the amounts you have paid (and the reductions) along with any excess or shortage. It's important to remember that while having an escrow account can provide peace of mind, it can also mean higher monthly payments due to the additional fees associated with it. When deciding whether or not to have an escrow account, it's important to consider both the benefits and drawbacks. On one hand, having an escrow account can help ensure that important bills are paid on time and automatically, as well as potentially get you a discount on your interest rate or closing costs.
On the other hand, it can mean higher monthly payments due to additional fees associated with it.