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Real Estate Terms : Escrow Account

Posted By Paula Henry on Friday, October 09, 2009 7:36:00 PM | 6 Comments

An escrow account is a designated savings account into which funds get deposited for a specific purpose.

With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.

Escrow accounts are managed and disbursed by lenders.

When a homeowner 'escrows' his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home's annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.

By sending a pro rata portion of the tax and insurance bill each month, the homeowner's escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.

In Indianapolis, taxes are currently behind and the amount you have escrowed may not cover the amount of the certified taxes when they are posted.

Discussion

#1 Posted by Capitola real estate at 10/11/2009 0:19 PM

If I deposit my money with an escrow account, am I going to get some other feed backs except paying the tax bills and insurance payments. Is it possible to get some interest?

#2 Posted by Snow accommodation at 10/12/2009 -1:00 PM

I also find that the escrow account is a great way for your mortgagee to fail at simple math. It definitely pays to keep tabs on the balances and your amount.

#3 Posted by Paula at 10/12/2009 7:40 PM

Capitola - I know some states offer an interest bearing account,so the answer is; it depends on where you live. Thanks for stopping by!

Snow Accommodations - Now, that's funny :)and true!

#4 Posted by Ohio Rent To Own Homes at 10/28/2009 3:29 AM

Your article about escrow account is highly informative, however I don't understand why the escrow accounts are managed by lenders.

#5 Posted by Laguna Realtor at 10/28/2009 6:19 AM

Thanks for the info. I think escrow account is a great way for keeping money that is the property of others.

#6 Posted by Newport Realty at 10/28/2009 9:38 PM

This account is very beneficial to home owner. Indeed it is better than saving account. Through this account it is become easy to pay taxes and insurance of your home. Thanks for sharing such a nice stuff here.