Can I Have My Own Escrow Account if My Mortgage Company Charged Too Much?
Escrow accounts are basic trust accounts that are used in business transactions. While they can be used to move a wide variety of assets around, one of their most common uses is in mortgages. They should not be confused with the escrow of the deed itself, since they are a smaller account attached to the general mortgage account of the lender, but they are still important to borrowers and the payments they must make. Borrowers often have a choice whether to use these escrow accounts or not.
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Escrow Account
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In a mortgage, the escrow account is an additional account that the lender uses to gather an extra payment from the borrower each month. The funds so collected help the lender pay for a number of property expenses, including property taxes and homeowner's insurance. This means that the borrower does not need to make these payments, and the lender ensures that late payments do not result in additional liens against the property. This is a common method for making these miscellaneous payments.
Managing Your Own Account
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In many cases, you do have a choice about using the lender's escrow account or choosing a different way. However, creating your own escrow account is unnecessary. An escrow account is essentially the same as a trust account, designed for a trustee to hold assets on behalf of a party for a particular purpose—in this case, the lender is the trustee of the funds and makes payments on your behalf. But you do not need to create an escrow account to manage your own funds; you can simply retain ownership of them.
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Budgeting for Payments
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The primary option instead of using an escrow account is to make the payments yourself, in cash, when they are due. This depends on the terms of your insurance policies and the property tax rules of your local government. The payments you make will probably not be much different from the lender's, since lenders work to create highly accurate payment information to keep a proper escrow balance, but at least you will be in control of the payments yourself.
Considerations
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Before you try to end your escrow account and manage payments yourself, you should check the rules of your mortgage contract first. Call your loan officer and see what the lender requires. Some lenders require that an escrow account be created and maintained throughout the life of the mortgage no matter what. In this case, you will not be able to handle the payments yourself.
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