Benefits Of Using An Escrow Account When Buying A House
Posted on: 15 December 2016
As you are preparing to buy a house, your lender may ask you if you would like to set up an escrow account with the loan. An escrow account is a saving's account used to help homeowners pay their property taxes and home insurance. While some lenders require these, many do not; yet, there are some benefits of choosing to have an escrow account when you buy a house.
They are convenient
If you decide to set up an escrow account, your lender will determine approximately how much your homeowner's insurance and property taxes will be for the year. They will divide this amount by 12 (months), and this will determine how much your escrow payment will be each month.
Your lender will receive bills for these things directly from your county and insurance company, and they will pay the bills when they are due. You will never have to worry about writing checks or paying electronically, which makes using an escrow account very convenient.
They make budgeting easier
A second benefit of using an escrow account to pay these expenses is it offers an easier way for you to budget your money. While people who are great at budgeting might not care about this factor, anyone who is not great at budgeting will like this. Every month when you pay your mortgage, you will simply pay the escrow charge. By doing this, you will never have to come up with a large sum of money when one of these bills comes due. This makes budgeting your money easier, and it eliminates the hassle of trying to come up with money to pay one of these bills.
You can avoid late payments and fees
The other benefit this offers is the ability to avoid paying extra fees for missing payments. If you fail to pay your property taxes by the due date, for example, the county may charge you a hefty fee, even if it is paid just one day late. With an escrow account, you will never have to worry about this. Your lender assumes the responsibility of paying these bills, and most lenders will pay the late fees themselves if they somehow inadvertently forgot to pay a bill for a borrower.
If you are getting ready to find a house to buy, talk to your real estate agent about escrow accounts. Your agent might be able to give you more information about the pros and cons of having one. For more information, contact local professionals like Danny the House Buyer.
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