5 Myths About Escrow Accounts

Escrow might make you uncomfortable, especially if you’ve heard any bad myths about these types of accounts. Whether you’re getting an escrow bank account or an escrow account mortgage, these are some myths you should know before getting started.

Escrow accounts keep you from changing your home insurance.

Switching your home insurance while you’re under a mortgage escrow account is incredibly easy. Even though your money is tied up in the mortgage account, you can contact your mortgage company and let them know you’re looking to make a change. All you need to do is shop around for a new policy, and set up a start date. Afterward, call the company that controls your mortgage escrow account and notify them of the change. Be sure to have your loan number, new policy number, and the phone number of your new agent. Finally, call your old policy and let them know you’ve made the change.

Switching home insurance companies requires a large down payment.

Changing home insurance with mortgage escrow account requires no money out-of-pocket. Your mortgage company controls mortgage escrow accounts, and the payments to your home insurance are made automatically. This means that when you switch insurance companies, your mortgage company pays the premium out of your account, as long as you have sufficient funds. It’s always best to check your mortgage escrow account before you switch home insurance to make sure you have enough funds to cover the change.

If you put 25% down on your home, you do not need an escrow account.

If you put down 25% of your home’s mortgage, you may still be expected to start an escrow account. After the mortgage collapse in 2009, lenders began to require an escrow account regardless of how much money you have for a down payment. Having an escrow account tied to your mortgage enables mortgage companies to sell your mortgage without trouble. Regardless of the amount you put down as a down payment, you may still be required to start a mortgage escrow account.

It is better not to have an escrow account and pay taxes and insurance on your own.

There are many advantages to paying your bills on your own, including having full control over your finances. However, a mortgage escrow account could be a better solution for those who have a hard time-saving money on their own. A mortgage escrow account is included in your monthly payment and is controlled by your mortgage company. The company pays the insurance and property taxes, so you don’t have to worry about it.

The mortgage company is responsible for miscalculations.

From time to time, a mortgage company can make a mistake and not charge enough money for the mortgage escrow account. This means that when a bill comes due, you may not have sufficient funds in the account to cover the cost. Even though it was their mistake, you are still responsible for the finances and the bills. Not paying them on time could result in late fees.

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Posted on May 18, 2023