Escrow Accounts and Mortgage Modification
Most of the people are in a dilemma to pay the taxes for their new home by maintaining an escrow account or by themselves regularly. Everybody has different situations; therefore, they find different options suitable for them.
According to the law, setting up of an escrow account to pay all of your taxes and mortgages is necessary. But by making an agreement with the owner of the house, and paying a certain decided amount in advance, you can get free from the liability of setting up an escrow account and can pay all your taxes by paying money on your own.
The annual amount to be paid as the house tax plus the insurance amount is added up and divided into twelve equal parts. This amount plus monthly mortgage amount is deducted from the buyer’s escrow account. In the case of absence of escrow amount, some additional amount is charged and the monthly amount is paid by the buyer himself.
How to be sure that you need and escrow account or not
Finding answers to certain questions can help you make up your mind about the setting up of escrow account. These questions are:
- If you are good at saving money, you probably do not need an escrow account. Otherwise, setting up an escrow account is a must to save money.
- If you can manage money by investing it in shares, bonds etc. then it is better to save it rather than wasting it by putting in an escrow account.
- If the owner is particular about having an escrow account, it is better to have one rather than starting conflicts amongst yourself on this issue.
- If your monthly income is stable, it is better to setup an escrow amount, as you can easily save a portion of your income rather than taking out a lump sum amount.
Website Link: http://www.bankrate.com/finance/real-estate/pros-cons-saving-escrow-account-1.aspx