A Starter Guide on Understanding How Your Insurance Policy Affects Your Escrow Account
With the rise of rates, many homeowners may start noticing their insurance premiums are taking a toll on their escrow accounts, leaving a negative balance in it. Many new or young homeowners may not know the impact or the solution to these increased premiums. This article will explain what an escrow is, how escrow is affected by insurance rates, and how to prevent an escrow shortage.
What is it?
#Escrow is an account you pay into that pays your #taxes and #insurance on your behalf. Many #homeowners pay into this account by paying their #mortgage and will continue paying it until the mortgage is paid off or they sell their home.
Where Does Escrow Come From?
#Escrow is created between the #homebuyer and seller. The buyer places a deposit on the #home as a sign of good faith from the buyer and the #escrow account is created to hold the deposit. When the purchase is complete, the money in the account is applied to the down payment.
Your lender will start your escrow account if you don't place a 20% deposit on your house.
How Does Escrow Affect Insurance?
#Escrow accounts serve two purposes: paying #taxes and #insurance. After the purchase, a #lender will be selected and they will create your #escrow account. Then, your monthly mortgage payments will pay for your #taxes and #insurance. However, your tax bill and #insurancepremiums can change year after year.
Now your #lender will determine how much you will pay for your #taxes and #insurance based on the previous year. If your #lender collected too much, you will be issued an #escrow refund. If your #lender has noticed they didn’t collect enough, then you will pay the difference. There are different options to pay it including a one-time payment or increase your monthly mortgage. Often, #lenders will ask for the buyer to pay the first term of #insurance or 10%-20% of your #premiums to ensure buyers won’t see a shortage in their #escrow account.
What Are Important Facts I Need to Know about Escrow?
- If you #refinance you can keep your #insurance company or you can shop for a new insurance coverage. Please talk with your #lender about the coverage you will need.
- The best way to pay less #escrow is to find the right #homeowner #insurance #coverage.
To know more information about homeowner insurance and the right coverage for you, contact us at 417-753-7454 to talk with one of our agents today at Rogersville Insurance Agency.
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