Your home mortgage is a monthly payment based typically on principal and interest.  When you pay less than 20 % down on the purchase price of your new home, you are required to have the real estate taxes and homeowners’ insurance included in your monthly payment.

The amount for the real estate taxes and homeowners’ insurance is put in a separate account with your lender called an escrow account.  Therefore, we refer to your taxes and insurance being escrowed. 

The lender maintains the account and is required to pay your real estate taxes and homeowners’ insurance as it comes due. Your monthly payment may be adjusted annually based on your property tax and homeowners’ insurance rate change.  

When you payoff your mortgage or sell the property, the lender is required to credit you for unused portions and typically the credit is reflected in your payoff amount.

Many homeowners elect to escrow the property taxes and insurance including it in their monthly payment as it eliminates large expenditures every six months and is easier to work into a monthly budget.

Roxanne Johnson

Broker, ABR, CRS, GRI