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What is an Escrow Account?
Homeownership

What is an Escrow Account?

Cassandra TorkelsonCassandra Torkelson
Real Estate Officer | NMLS# 530661
cassandra.torkelson@border.bank
218-683-3016
 

 



Many people have heard the term, escrow account, but often don’t know exactly what it means or how it works. As a part of the mortgage process, you may be required or be offered an escrow account. The easiest way to define an escrow account is that it’s a holding account managed by your mortgage servicer. 

Every month, a portion of each mortgage payment is deposited into your escrow account to cover your estimated property taxes and homeowners’ insurance for the year. When your homeowner’s insurance is due annually, we pay it for you and when your taxes are due bi-annually we pay that as well. It's that simple and convenient!

You will still receive a bill in the mail for these items…but it’s the only bill you DO NOT need to pay, since it was already paid by the funds in your escrow account. You will still want to keep these documents in a safe spot for your personal records and tax purposes. Our escrow department also receives a copy of this bill and will make sure that all bills are paid on time for you. We cut the check from your escrow account and send via mail on your behalf.

Once per year you will receive an escrow analysis. An escrow analysis is an annual audit of your escrow account to see whether your monthly payment is adequate to pay for the taxes and homeowners insurance coming due for that year. Increases and decreases to your tax or insurance bills may cause your monthly mortgage amount to change. It’s important to know that your principal and interest payment will never change. The escrow part of your monthly mortgage payment WILL change every year, and you will have adequate time to prepare for these changes. 

An escrow account may be required or optional. Feel free to contact your local lender to discuss your options and, as always, we’re here to help!

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