Today’s real estate word of the day is an escrow account. We’re going to define it, use it in a sentence and then quickly discuss it. All right, Shana Acquisto, she’s a luxury real estate broker. She’s present. She’s going to read that for us. Go ahead, Shana.
Escrow account. Once you I’m sorry. Once you close your purchase transaction, you may have an escrow account or an impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account, escrow account for the payment of items like property taxes, homeowner’s insurance when they can do.
I think that’s basically, you know, a lender pays them with your money instead of you paying them. So it’s kind of like when you’re a little kid and you have your little savings account and then, you know, you have a savings account, you have to go to your parents and say, hey, this needs to be paid. But I trust that you’re going to you know, you’re going to hold the money for me go.
And it makes it easier. So normally your taxes, if your taxes are, say, twelve thousand dollars a month or twelve thousand dollars a year, you would pay a thousand dollars a month for your taxes for like one 12 each time.
And then at the end of the year, the the lender would actually go ahead and make that one large payment of twelve thousand dollars for you and you would be done. Yeah. So, you know, and so to use that word in a sentence, it would be I kind of think it’s a good idea for everybody to have an escrow account. Yeah. With their mortgage because it keeps people on track and makes it that much easier. There’s no like interest with it. There’s no reason not to have it.
It’s tough when you at the end of the year, the beginning of the year, that you have to come up with with your taxes up front. And, you know, I think a lot of lenders are requiring it now based on what happened in 08 and 09.
Yeah, I think it’s a good idea. You like honestly, if you had to even when your mortgage is paid off, I think it’s a good service to kind of do rather than worrying about doing it yourself. Yeah.
Anyways, a bonus round for escrow account is how much is required to put in your escarole account at closing. And that depends. So that is something that’s not standard and would be something to discuss with the lender because sometimes they want three months, sometimes it’s six months that there’s, you know, variables there. Yeah, there you go. And sometimes you have an escrow shortage. Again, another word will cover that once and we’re done.