How Escrows Work for You

A saving tip would be to understand how escrow accounts can be used to optimize your financial convenience one way or the other.

Norcross, GA (prHWY.com) November 15, 2010 - If you have a house of your own, you may be aware that every month, you have to pay some amounts of money that are related to home ownership, insurance premiums, taxes and the like. Defaulting on these can be damaging financially. This is where escrow comes in. At the same time you make mortgage loan payment, you deposit money into an escrow account with an institution, and these use the money in the account to pay the essential bills like property taxes, lease payments, hazard insurance, and others on time.You are required to deposit an amount that is a bit more than what is required for bill payments, but this amount is used as a 'cushion' amount or a buffer, so that the lender can use this amount if you fail to pay into the escrow account for some time.

Reputed lending firms do not have large cushion requirements and also pay interest for the money in the escrow account. A money saving tip is to only deal with respected lenders.How can escrows be advantageous? In the way that you do not have to deal with the hassle of paying taxes, premiums and other payments yourself in addition to mortgage loan payments. Missing payments on these can cause substantial financial loss. The lenders pay these on time, and if they do not, you are not responsible. Also, it is easier to pay smaller amounts once a month, than come up with large amounts all at once, one time a year.However, experts and saving tip givers say that a combination of one of the escrow accounts with the mortgage loan may cause your payment amounts to be erratic. Fixed rate mortgages also tend to have fluctuating payments in the event that your insurance payment rises, or your tax assessment is renewed.

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Tag Words: mortgage loans, saving tips

Categories: Finance

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