What Are Escrows?

If you’re looking to purchase a home, the word escrow may be thrown around a lot. If you can’t get your head wrapped around what escrows are, you’ve come to the right place!

So first things first, what are escrows? An escrow account is a free service provided by your mortgage servicer that collects your tax and insurance payments as part of your monthly payment. In turn, when your tax and insurance payments come due, your servicer pays them in a timely manner. This actually benefits both parties, as it ensures the lender that the taxes and insurance payments are made on time. This also benefits the homeowner, as they will not be blindsided by having to make large tax or insurance payments, as they’ve already been collected.

Now, you can have escrow shortages. Typically, these are due to a tax reassessment where the servicer was not collecting enough taxes as part of your monthly payment.

Simply contact the county after closing in order to have them estimate your new tax payment. You can provide your servicer your trim notice and they’ll adjust the tax paid accordingly!