Question: “What comprises my escrow account?” -Sarah | Hanover, MA
Answer: Your escrow account is comprised of your real estate taxes, homeowners insurance, flood insurance, and when applicable your mortgage insurance.
Each month you pay 1/12th of your annual taxes and insurance into your escrow account. Your quarterly tax payment and annual insurance payment are then pulled from your escrow account so you do not have any surprises pop up. Because your taxes are paid quarterly, homeowners insurance annually and mortgage monthly, they are on slightly different cycles.
At closing, you should expect to fund your escrow account with 2 months of taxes and 2 months of insurance so there is a sufficient cushion. Whatever money goes into your escrow account is considered your money, should you refinance, sell or pay off the mortgage, that money is returned to you from the mortgage servicer.
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