The Escrow Myth
There are times when an escrow account is not beneficial to the borrower.
When you set up an escrow account, you are asking the escrow company to play
the middle-man between you and the lender, property insurance company,
county taxes and private mortgage insurance company regarding your payment
to them.
You pay the escrow company, who in turn divides it accordingly, then passes
it on to all the collectors involved. When discussing a monthly mortgage
payment, have you ever heard the terms PI/TI, PI/TI/MI or just PI? These
letters, when written after a payment amount, are referring to what is
included in that payment. They are defined as the following:
PI: principal and interest payments
TI: property taxes and insurance payments
MI: private mortgage insurance payments
Escrow Accounts combine a number of monthly payments into one bill, easing
the burden of the borrower's monthly bill-paying chores. It also helps the
borrower to budget. If the borrower has his property taxes and home
insurance fees escrowed, he no longer has to rely on his own self-discipline
to save up each month so that he will have enough funds when it comes time
to pay the annual fees. The funds for these bills are saved through the
required escrow payments.
The advantages to escrow accounts:
Requiring a borrower to escrow his property tax payment provides security
for the lender from liens that can be placed on the property if the borrower
fails to pay these taxes. These tax liens are given priority over any other
liens, regardless of the order in which they were placed on the property.
This means if the lender had to foreclose on the property, he would then be
responsible for payment of the tax liens. Likewise, escrowing home insurance
payments protects the lender from liability costs not covered under a policy
because it has lapsed from lack of payment. We strongly recommend that any
seller considering seller finance request that his buyer escrow the property
taxes and insurance.
The disadvantages to escrow accounts:
There are times when an escrow account is not beneficial to the borrower. If
the borrower has a large property in which the annual property tax and
insurance payment is significant and he also has a large degree of
self-discipline, he can opt to make the payments himself annually and earn
interest on the funds up until the time they're due. This is also a great
way for a property manager with a large clientele to earn an extra income.
The Escrow Myth
There are times when an escrow account is not beneficial to the borrower.
When you set up an escrow account, you are asking the escrow company to play
the middle-man between you and the lender, property insurance company,
county taxes and private mortgage insurance company regarding your payment
to them.
You pay the escrow company, who in turn divides it accordingly, then passes
it on to all the collectors involved. When discussing a monthly mortgage
payment, have you ever heard the terms PI/TI, PI/TI/MI or just PI? These
letters, when written after a payment amount, are referring to what is
included in that payment. They are defined as the following:
PI: principal and interest payments
TI: property taxes and insurance payments
MI: private mortgage insurance payments
Escrow Accounts combine a number of monthly payments into one bill, easing
the burden of the borrower's monthly bill-paying chores. It also helps the
borrower to budget. If the borrower has his property taxes and home
insurance fees escrowed, he no longer has to rely on his own self-discipline
to save up each month so that he will have enough funds when it comes time
to pay the annual fees. The funds for these bills are saved through the
required escrow payments.
The advantages to escrow accounts:
Requiring a borrower to escrow his property tax payment provides security
for the lender from liens that can be placed on the property if the borrower
fails to pay these taxes. These tax liens are given priority over any other
liens, regardless of the order in which they were placed on the property.
This means if the lender had to foreclose on the property, he would then be
responsible for payment of the tax liens. Likewise, escrowing home insurance
payments protects the lender from liability costs not covered under a policy
because it has lapsed from lack of payment. We strongly recommend that any
seller considering seller finance request that his buyer escrow the property
taxes and insurance.
The disadvantages to escrow accounts:
There are times when an escrow account is not beneficial to the borrower. If
the borrower has a large property in which the annual property tax and
insurance payment is significant and he also has a large degree of
self-discipline, he can opt to make the payments himself annually and earn
interest on the funds up until the time they're due. This is also a great
way for a property manager with a large clientele to earn an extra income.
The Escrow Myth
There are times when an escrow account is not beneficial to the borrower.
When you set up an escrow account, you are asking the escrow company to play
the middle-man between you and the lender, property insurance company,
county taxes and private mortgage insurance company regarding your payment
to them.
You pay the escrow company, who in turn divides it accordingly, then passes
it on to all the collectors involved. When discussing a monthly mortgage
payment, have you ever heard the terms PI/TI, PI/TI/MI or just PI? These
letters, when written after a payment amount, are referring to what is
included in that payment. They are defined as the following:
PI: principal and interest payments
TI: property taxes and insurance payments
MI: private mortgage insurance payments
Escrow Accounts combine a number of monthly payments into one bill, easing
the burden of the borrower's monthly bill-paying chores. It also helps the
borrower to budget. If the borrower has his property taxes and home
insurance fees escrowed, he no longer has to rely on his own self-discipline
to save up each month so that he will have enough funds when it comes time
to pay the annual fees. The funds for these bills are saved through the
required escrow payments.
The advantages to escrow accounts:
Requiring a borrower to escrow his property tax payment provides security
for the lender from liens that can be placed on the property if the borrower
fails to pay these taxes. These tax liens are given priority over any other
liens, regardless of the order in which they were placed on the property.
This means if the lender had to foreclose on the property, he would then be
responsible for payment of the tax liens. Likewise, escrowing home insurance
payments protects the lender from liability costs not covered under a policy
because it has lapsed from lack of payment. We strongly recommend that any
seller considering seller finance request that his buyer escrow the property
taxes and insurance.
The disadvantages to escrow accounts:
There are times when an escrow account is not beneficial to the borrower. If
the borrower has a large property in which the annual property tax and
insurance payment is significant and he also has a large degree of
self-discipline, he can opt to make the payments himself annually and earn
interest on the funds up until the time they're due. This is also a great
way for a property manager with a large clientele to earn an extra income.
About The Author: Paul constructs personalized investment plans that
maximize profits and realize financial dreams. If you are ready to claim
your success and learn what only the ultra-prosperous know, begin by going
to http://www.myreiteam.com/link.html?promotion=trez, and capitalize on the
real estate revolution.
