For many new homebuyers, escrow of property taxes can be a confusing topic. Some wonder if they need to do it. Others may be unsure how their property taxes actually get paid. Escrowing your property taxes is actually a very simple concept and a common way to pay your property tax bill.
When you escrow your property taxes, what you are really doing is setting aside money little by little every month for the sole purpose of paying your property taxes or homeowners insurance premiums, or both.
Each month your mortgage payment will include an extra amount that is designated for escrow. The amount and its purpose will be clearly visible on the mortgage statement so you always know how much is going in to the account for tax or insurance purposes versus how much of your payment is going toward principal and interest. The amount of money designated is based on the most recent year’s tax bill. The actual amount may fluctuate a bit from year to year, but overall the numbers are usually right on target.
These funds then sit in a specially designated account at a bank or other financial institution. The account is usually set up as part of your mortgage agreement and typically resides with the same institution that holds the mortgage on the property. It’s important to understand that the funds in this account cannot be used for any other purpose than the use that is specified in the mortgage documents. Your escrow account is not a savings account that can be accessed by the homeowner or lender and used to pay other bills.
At Title Junction, we care about helping you stay informed throughout your real estate transaction. The experts at our title company have extensive knowledge about real estate not only in Cape Coral and Fort Myers, but all of Florida as well.
Have questions? Give us a call at 239.415.6574.
In case you missed it, check out our last Title Junction post: Where Did My Money Go After Selling My Home?