What is included in your monthly mortgage payment?
A mortgage payment bundles your loan payment, hazard insurance payment and property tax payment into one monthly bill. An escrow account (also referred to as impound or trust account) is an account for paying your property taxes and insurance premiums and any other charges.
Why do you need an escrow account?
Escrow makes payments easier, flattening your basic homeowner’s expenses into one predictable bill.
So it will never change?
No, whole your loan payment won’t change (unless you refinance), we can’t control taxes and insurance companies, whose costs do fluctuate. Your bill is an estimated amount, based on the previous year’s payments and adjusted for inflation, divided by 12 and added to your mortgage payment. Luckily, most loans pad escrow with a cushion (also referred to as a reserve or target balance) to cover any unanticipated disbursements or payment increases. The cushion amount may be 0-2 months of escrow payments based on the federal and state guidelines and your loan documents. Consider it like overdraft protection.
On an annual basis we’ll conduct an escrow analysis to review the escrow deposits and expenses for the previous year and the projected activity for the next year. Your account is analyzed yearly to make sure the correct amount is collected to cover your property taxes and insurance premiums, and the cushion. Your payment can go up or down, and if you have a considerable surplus, you could even get a refund.
Automatic payments & changes
If you set up automatic payments through ACH, then the amount taken from your account will be adjusted to cover any decrease or increase starting on the effective date of the new payment. If you set up automatic payments through your financials institution’s bill pay service, you will have to adjust future payments to the new amount due.
We’ll be here for the long term helping you sift through the complexity and mind the details long after closing.
If you have any questions, just ask
Guild Mortgage is an Equal Housing Lender; NMLS 3274. We are licensed to do business in the state of Arizona. BK#0018883; AZ BKBR 0018986; Branch NMLS 156371. All loans are subject to underwriter final approval, terms and conditions may apply. Subject to change without notice. Always consult an Accountant or Tax Adviser for full eligibility requirements on tax deductions.