Escrow accounts are accounts that are set up to fund your property taxes and/or homeowners insurance. Every month, you put money into that account so your servicer will have the full amount to pay those bills when they’re due.
Here’s the thing, though—we only collect from the escrow account based off of what the previous year’s bill was, and unfortunately, property taxes and homeowners insurance tend to increase over time. This means that each year, you’ll have a small deficit in your escrow account that you’ll need to cover.
For example, let’s say your property tax increases $1,200 year over year. You might be thinking that your monthly payment will have to increase by $100 to account for that, and you’d be correct, but what you might not realize is that your escrow account was likely $1,200 short the previous year, so your future payment will have to increase by another $100 to account for that as well. Therefore, a single $1,200 year-over-year increase in your property tax actually equates to a $200 increase in your monthly payment.
This is why it’s important that you partner with a lender who’ll keep the servicing of their loans. This way, if you have any questions or any problems arise, you’ll have a single point of contact who can help you. If you work with a lender whose servicing rights get sold over and over again, you’re more likely to get treated as a nameless, faceless customer. We, on the other hand, are committed to being your long-term lender, and we always have your best interests at heart.
As always, if you have any questions about this or any other mortgage-related topic, don’t hesitate to reach out to us. We’d be glad to help you.