Escrows & Impounds – The Bottom Line

Everyone hates paying property taxes. Property taxes are due twice a year on April 10 and on December 10. So if you have a mortgage in place already or are thinking about getting one, consider getting an escrow account set up a monthly basis. This will help you secure the best possible interest rate. Escrow accounts are actually required on transactions with less than 20% equity.

What is an escrow account and why do they matter?

They matter because if you allow your mortgage lender to collect for property taxes and insurance on a monthly basis with your mortgage payment, they get to use that money and invest it for themselves. They will reward you for this by giving you a slightly better interest rate than if your property taxes and insurance are paid separately. It depends on what time of the month and what part of the year you’re closing your mortgage loan on. We usually estimate for about six months of property taxes as a prepaid items because they are due no matter what.

For example on a purchase scenario we will collect for six months of property taxes as well as for a few months of hazard insurance and this will be a prepaid item that will show up on the final closing statement at the close of escrow. The reason is because the lender needs to estimate however many months worth of property taxes or insurance is due for you to get caught up with the billing cycle.

Are escrow accounts ever waived?

The answer is yes if you have 20% equity in your property or more you can get property taxes and insurance removed from your house payment. You can set up the mortgage with property taxes and insurance included with your house payment and then when you’re first bill comes you can call up your mortgage lender and request the removal of your impounds.

Lots of borrowers today find having a monthly account for property taxes and insurance included with their house payment to be easier because they’re not getting a surprise check twice per year. It’s all a matter of preference. If you have less than 20% equity in your property you must have property taxes and insurance included with your house payment.

If you have any questions about property taxes or are in need of a quality home mortgage loan give me a call Scott Sheldon mortgage lender at 707-217-4000. We can discuss escrows and impound accounts and get to the bottom line.

Posted in:

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

Why you should wait for your credit to improve before applying for a mortgage

Why you should wait for your credit to improve before applying for a mortgage

In the current consumer landscape, securing approval for a mortgage is a significant challenge. It’s…

How to avoid getting a jumbo loan due to Coronavirus

New Mortgage Loan Limits for 2023

The Federal Housing Finance Agency announced on Tuesday, November 29th the new loan limits for…

Mortgage Word Cloud Art

Why your income is your lifeline to finance a home

Getting mortgage loan financing requires you providing a blend of good cash, ample credit, and…

2020 Conforming Loan Limits Increaase

New loan limits for 2020 makes getting a mortgage easier

The Federal Housing Finance Agency which oversees loans bought by Fannie Mae and Freddie Mac…

View More from The Mortgage Files:

4 Comments

  1. […] Taxes-refers to the monthly property taxes built into the house payment, oftentimes deemed an impound or escrow account […]



  2. […] Taxes — The monthly property taxes built into the house payment, often termed an impound or escrow account. […]



  3. […] Taxes — The monthly property taxes built into the house payment, often termed an impound or escrow account. […]



  4. […] Taxes — The monthly property taxes built into the house payment, often termed an impound or escrow account. […]



begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!