How does an escrow account work?
When establishing an escrow account, your lender will calculate the total yearly payments for your property taxes and homeowner’s insurance. The annual amount will then be divided by 12 to calculate your monthly escrow payment. This monthly amount is added to your principal and interest payment to make your total mortgage payment.
Every year, your lender will review your escrow account to ensure it has the right amount of funds. The lender will recalculate your payments based on the previous year’s property tax and insurance costs as well. If there were a shortage within your account or an overage, your lender would require a supplementary charge, or reimbursement.
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The Scurlock Group