The Mortgage Brothers Show

What’s the BIG Deal About Escrow Accounts?

Often times we’ll get borrowers calling us asking what an escrow account is for and if it is a “Good” OR “Bad” thing to have one on a mortgage. We figured we’d dig in a bit and help people get oriented. First off, escrow refers to an arrangement in which a third party temporarily holds a sum of money or property until a particular condition has been met. Now, let’s dive in.

Why do banks encourage borrowers to have an escrow account?

Banks want to make sure that your property taxes and homeowner’s insurance are covered. They do this because if — in the case of taxes for example — you don’t pay on time, a tax lien will go on your property. And this tax lien takes priority ahead of the mortgage, which is not a position the banks want to be in.

It’s a similar thing with homeowners insurance. If a homeowner forgets to make his or her homeowners insurance payment and the property suffers massive damage, what’s going to happen? What happens if the borrower just walks away and the bank is left with collateral in the form of a home that cannot be repaired? Well, the bank won’t be happy. So, when you make your mortgage payment the bank is collecting from you not only the principal and the interest of the loan, but also the taxes and homeowner’s insurance. This is all included in the prorated monthly payment. Having an escrow account takes away the stress of having to worry about bi-annual property tax and annual homeowner’s insurance payments.

What about escrow waivers?

An escrow waiver is when the bank does not pay your taxes and homeowners insurance. If you don’t want an escrow account, banks will likely charge you extra on your closing costs because their risk will have gone up a tiny bit.

Either way, whether you have an escrow account or not, we’re happy to help you get that home of your dreams. If you’d like to know more you can check out our podcast episode up above or shoot us a message. We’d be happy to help!

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Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

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