September 8, 2022
An escrow account is an easy way to manage property taxes and insurance premiums. You don’t have to worry about saving for them because you make one monthly payment where:
When those bills are due, your servicing lender will use the funds in your escrow account to pay those expenses for you.
*Helpful Hint – If you just built a new home, your property taxes are based on the land value until the assessor can assess the new building. Those property taxes WILL go up when your home’s value is assessed and taxed. Plan to put extra money towards your escrow early on to make sure you aren’t surprised by a large increase in payment because of the increase in taxes and associated escrow payment.
Property taxes and insurance premiums change over time. Your escrow account will be re-evaluated annually to make sure you have enough to cover these expenses. To help with any unexpected increases, you need to always keep a minimum balance in your account. This is called your cushion and is usually 2 months worth of your escrow payment.
During an escrow account review, your servicing lender will figure out how much will be in your account for each month for the next 12 months. At its lowest point, if it’s projected to be: