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How Does Mortgage Escrow Work?

how does a repayment mortgage work

Your lender may insist you put money into an escrow account as part of the mortgage agreement.


If your mortgage company has set up an escrow account, you won't pay into it directly. Instead, Realty Times states, your mortgage payment will be set up to include your monthly hazard insurance premium, a portion of your property taxes for the year and, if your lender requires it, a mortgage insurance premium. Your lender will then use the money to pay the taxes and insurance as they come due.


Your lender may require you to put an initial deposit into escrow when you close on the loan, Realty Times states. If you only have four months left before property taxes are due in January, your lender could require you deposit eight months of payments at closing, so that

it will have the full year of payments when they're needed. Lenders can also ask for two extra months as a cushion, in case you're delinquent making payments at some point.



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