Escrow accounts

Question

Escrow accounts

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Escrow accounts are set up to ensure that borrowers will make payments on housing-related expenses such as insurance and taxes. This provides security for the lender that these expenses will be paid and also spreads out these expenses over the course of the year for the borrower, rather than having to come up with large payments all at once. While escrow accounts are typically required on most conventional financing, they can be waived if the borrower makes a down payment of at least 20% of the purchase price. Banks holding escrow accounts are not required to pay interest on the funds, although some may choose to do so voluntarily.

Escrow Accounts