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| *Loan,banking and credit>>>tax accounting |
Shuld there be an escrow account if the insurance and taxes are being paid by me and not the mortgage company |
If an escrow account is in existance to cover your estimated real estate taxes and home insurance, should the lender be paying these bills ? If I am paying the taxes and insurance on the property should I have or need an escrow account? The lender is not paying any of these bills, but continue to request funds forthe 3scrow account. The mortgage, insurance etc. should be payed from the Escrow account. But generally the way it works is that the home owner pays a monthly payment that includes mortgage, insurance etc. The portion for insurance accumulates in the escrow account and then is dispursed in a lump sum to pay the insurance. Here's an example. You make a monthly payment of $1000 on a $700 mortgage. $300 is taxes, insurance etc. and accumulates in the escrow account. At the end of the year there is $3600 in the escrow account. Taxes and insurance come to $3000, and you receive a $600 refund. At some point the money in the escrow account is used to pay insurance and taxes. The law requires that you have access to info on that escrow account, to see how much is in the account and what payments have been made. Ask for a breakdown of escrow charges. You may be paying for Mortgage insurance. If you are not escrowing mortgage insurance and are paying property taxes and P&L insurance yourself then there should be no need for an escrow account. If you fail to pay for taxes & P&L (homeowners) insurance or are consistantly late to the point where the Taxing authority or insurance carrier reports you to the mortgage holder, an escrow account will be set up by the lender at their discretion. They do this to protect the property (collateral) and their investment from tax leins or auction or physical loss. If you have an escrow account then the mortgage company pays your taxes/ins bills; you never even see them probably. If you don't have an escrow account then you are responsible for paying them yourself. You have to seek out and purchase insurance and you get a property tax bill at the end of the year. You should NOT have an escrow account if you are buying a policy and/or getting bills separately for tax/ins. However, you have to specify it BEFORE your mortgage closes and you buy your house if you want to waive the escrow requirement. You can't just decide on your own to pay those bills yourself. Some lenders require you to have an escrow account no matter what (i.e. you can't pay the bills yourself, even if you want to). Here's how to find out if you need an escrow account: look at your mortgage bill/statement. If there is a line item for taxes and/or insurance and/or escrow then you do need one (apparently) and you don't have to pay those bills on your own. If you don't see those items on your bill, then you should NOT be depositing extra funds for escrow. Call your lender to get it straightened out and determine if there's a mistake. Or if you want to change the set-up. Are they collecting the full amounts necessary to pay the taxes and insurance, or just a token amount (for contingency)? They are protecting themselves by collecting the T&I. Just because you paid the T&I last quarter, doesn't guarantee you will next quarter. Two things: 1. Any money that remains unpaid in the escrow account will be paid back to you in full when the mortgage is paid off, so the money is not "lost". Every year, or two, the company should audit the escrow account, and refund any overage to the estimated T&I. If they don't, request a refund. they will probably want to keep an escrow balance of at least 1/2 of estimated annual T&I. 2. You can request that the escrow account be an interest-bearing account, that way you won't just be putting your money "in a shoebox". / Most mortgage companies require an escrow for property taxes and insurance to protect their interests. Very few companies will allow you to pay your own taxes and insurance. If your company is one of the few that allow you to pay your own, then its a mistake that they are asking you to pay money into escrow unless its for something else such as Private Mortgage Insurance (which is usually required when your down payment is less that 20%). If they don't allow you to pay your own taxes & insurance then the escow payments are proper and they should be paying your bills directly from that account. You should call your mortgage co. and find out what they doing with the escrowed funds- it's your money! |
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