Can some one tell me why we pay ESCROW out of our mortgage in the US?

Question

Is there any other use for it apart from property tax?

Answer 1

you don't have to have an escrow account, but most mortgage companies want it to guarantee your taxes are paid

escrow can also be used for home owner dues

Answer 2

It isn't required by law, but is by some lenders. Also, escrow isn't just taxes, it can refer to anything that the mortgage company handles in order to make sure that the payments are covered on things that could jeopardize their stake in the property, such as taxes and insurance. If you default on your taxes the government will sell your house only to cover the taxes and the bank (and you) are left dealing with the rest. Also if your insurance lapse and your house burns down it is another problem for the bank.
Some banks don't even want to be bothered with it. I prefer to have it taken out because right now I don't have the financial focus to keep from spending it prior to taxes, but my current bank doesn't do it.

Answer 3

To guarantee payment of property taxes and homeowner's insurance.

Some lenders will allow you to manage your own escrow if you have a long mortgage history and excellent credit. I got off the escrow bandwagon several years ago and now only pay P&I to the lender.

Answer 4

Escrow is also for fire insurance. Yes, loan companies do what to make sure the insurance is paid, but there is another reason for collecting escrow as well. While there are holding your money in escrow, they get to use it without paying interest on it!

Answer 5

Also property insurance. On any loan over 80% of principal the bank feels the risk is to great you might forget to make a payment and their collateral would be at risk. This way, they don't have to hire a clerk to track your payment, but can charge you to do it for you. Double benefit for them.

Answer 6

also your homeowners insurance.