When you get a mortgage loan, lenders usually set aside money for your property taxes and insurance premiums in an escrow account. Here is what you need to know about escrows and how they work.
What is an Escrow Account?
Escrow accounts are used to pay property taxes and insurance premiums for your home. This means there is no need to save separately for those annual and biannual bills; the bank already takes care of setting that money aside by setting up an escrow account for you. An escrow account can be compared to a savings account. Money is paid directly to the escrow, where it is held until payments for annual or biannual property taxes and insurance premiums are due. In Iowa, property taxes are paid in March and September.
How it works
When you pay a monthly mortgage payment, a portion of the total payment goes towards principal and interest of the loan and the other portion goes to an escrow account. Be sure to keep insurance and tax bills for your records.
Annual Escrow Reviews
Over time, insurance premiums and taxes tend to change. Each year we review your escrow account to ensure your account has enough funds to cover your bills. After each yearly review, we’ll send you a statement to let you know of any necessary changes to your account.
If you have any questions about escrow accounts or your loan, please don’t hesitate to contact me. I’d be happy to help!