My mortgage company wants me to pay 10 months worth of property taxes at closing ($524 a month for $5240 total). How does that money get paid out?
2006-12-12 06:22:58 · 8 answers · asked by Mike F 1 in Business & Finance ➔ Renting & Real Estate
escrow, is when an amount of money is put aside, and saved for you, like a bank account, and when the money is due, the collected money is paid out and the escrow is started over again, like when your taxes are escrowed for 6 months, then paid, then the escrow retstarts for the next 6 months. you pay every month(or its collected up front at closing) and when the money is due, it is paid, by whoever holds the money (or property) in escrow. so, your 10 months of escrow are not lost, they are being held for you for safe keeping. imagine if i took your 10 month reserve, and kept it until it was due, thats escrow. or imagine that i collect your taxes every month, and then when the 6 months is up, i pay for you, because i collected the money.
2006-12-12 06:31:22 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Depends on which state you are in, and when they require taxes to be paid. Property taxes are typically paid to the state/county once or twice a year. Your state is probably annually.
The escrow account will also include a 2 month "cushion" or reserve, so that there's still money in the account if your taxes go up. So most likely, your taxes will be due for the year at about the time you have made your 4th mortgage payment after closing. That way, they have 14 months worth in escrow, pay 12 months out, and have 2 months left over in reserve.
2006-12-12 06:27:29 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Generally when you have a mortgage the company that you are with will divide the amount that you need for taxes and insurance into equal payments that you pay along with your mortgage payment.It is like a savings account that the mortgage company sets up for you to make your yearly insurance and taxes payment.When it is time for those bills to be paid the mortgage company pays it out for you instead of you having to pay all that money out at once.
2006-12-12 06:31:08 · answer #3 · answered by sweetscpurplerose 1 · 0⤊ 0⤋
Basically, they estimate your taxes and/or insurance for the year. You pay 1/12 of this amount each month to your mortgage company. They receive your bill for taxes and insurance and pay it for you at the end of the year. They send the payment directly to your county or insurance. You have to do nothing but pay your house payment.
I don't see why they need 10 mos. worth of taxes up front, though, as you wouldn't close until almost a new year. Ask them to take that part out.
2006-12-12 06:40:49 · answer #4 · answered by Phoenix, Wise Guru 7 · 0⤊ 0⤋
Escrow Act = Trust Account
2006-12-12 06:30:55 · answer #5 · answered by Nirav 2 · 0⤊ 0⤋
An escrow account is where a portion of your monthly mortgage payment is set aside to pay taxes at the end of the year. They do it automatically for you.
2006-12-12 06:26:20 · answer #6 · answered by Blunt Honesty 7 · 0⤊ 0⤋
your mortgage company has to have funds in escrow to pay your taxes.every month when you pay your mortgage,some of that goes into your escrow account and the mortgage company will pay your property taxes for you.
2006-12-13 06:42:21 · answer #7 · answered by Bobbie 4 · 0⤊ 0⤋
Why would your mortage company want you to pay it???...when you pay your mortage payment it includes the taxes also...I'd find out more about what they are doing...doesn't sound right..
2006-12-12 06:32:53 · answer #8 · answered by Maggiemay 2 · 0⤊ 0⤋