What is an escrow or impound account?
An escrow or impound account is set up by your lender during the loan closing to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items on a monthly basis. Escrow accounts make sure that there is always enough money to pay these bills when they are due, and that these important payments are made on time. Escrow accounts also protect homeowners like you from having to come up with several large, lump sum payments at different times throughout the year.
An escrow or impound account is set up by your lender during the loan closing to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items on a monthly basis. Escrow accounts make sure that there is always enough money to pay these bills when they are due, and that these important payments are made on time. Escrow accounts also protect homeowners like you from having to come up with several large, lump sum payments at different times throughout the year. What are Freddie Mac and Fannie Mae? Mortgages made by lenders and banks are generally sold on the secondary market to produce cash so the lenders can make more mortgages. The largest purchasers on the secondary market are the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). These two organizations, called government-sponsored enterprises, or GSEs, were originally created by the government to make mortgages available to mo
An escrow or impound account is set up by your lender during the loan closing to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items on a monthly basis. If you have an escrow account, each of your monthly mortgage payments will contain a fraction of your annual property tax and insurance costs so there is enough money to pay these bills when they are due. Escrow accounts can be a convenient way to ensure your insurance and tax payments are made on time.
An escrow or impound account is established to allow the lender to collect property tax and hazard insurance payments on a monthly basis. The escrow/impound payment is collected with your monthly mortgage principal and interest payment and is calculated by taking your yearly tax and annual insurance payment and amortizing it over 12 months, along with a mandatory pad of at least two additional months worth of payments for each. The lender will draw from the account annually to pay the insurance policy and twice a year when the property tax installments are due, paying the county tax collector and insurance company directly. The escrow/impound account offers a convenient and timely way for borrowers to ensure that their property tax and insurance payments are paid.
