In some situations, a "close of escrow" can refer to the close of a real estate transaction. However, when it comes to mortgages, the word escrow means something different. In our case, escrow refers to the account that is used to pay a homeowner's property taxes and hazard insurance. Each month, you send your lender 1/12 of the annual amount due for your property tax and insurance along with your mortgage payments. This breaks those payments up so you don't have to come up with the entire amount at once. When the bill comes due, your mortgage lender will pay the amount for you.
Benefits of an Escrow Account
There are many benefits to having an escrow account. In general, it makes everything easier on both the lender and the homeowner. Let's take a look at a few of the benefits:
- Lower Mortgage Rate - By having an escrow account, it's less likely that your home's tax bill won't get paid and your insurance coverage lapse. The lender doesn't have to worry about a seizure on the property from tax authorities. In addition, they don't have to worry about losses due to property damage because of inadequate coverage. Due to the fact that the lender is able to assume less risk in this situation, you can often get a lower interest rate.
- One Less Bill You Pay - Having an escrow account makes your life simpler too. Instead of managing your real estate taxes and hazard insurance bills on your own, your mortgage lender at Lake of the Ozarks will pay it for you on your behalf. You don't have to worry about keeping track of another bill or paying it on time.
- Easier to Budget - Escrow accounts can also make it easier to budget. Instead of making a large payment once a year, you are able to break the payments down into monthly segments. The money is then saved for you until the bill is due. It's a lot easier to create a budget when you have regular monthly payments without sporadic large payments.
- No Large Bills - Which is easier: paying a couple thousand dollars at once or splitting that cost up across 12 different months? You might say either way you are paying the same amount. While this is true, I think we could all agree that smaller more manageable payments is a good way to go (unless you're just super good at saving money on your own). If you wait until the end, you might have spent more throughout the other months that you could have saved to put towards your mortgage payments.
In many cases, an escrow account is required with your mortgage loan at the Lake of the Ozarks. Be sure to talk to your lender to determine if an escrow account is a requirement for you. I am here for all of your Lake of the Ozarks home financing needs - feel free to give me a call at 573-746-7211 with any questions you may have.
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Sr. Residential Mortgage Lender
NMLS #: 493712
2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049
Cell: (573) 216-7258
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.