Simple Real Estate Definitions : Tax And Insurance Escrow
As a homeowner , your fiscal responsibility extends beyond just making mortgage payments. You must also pay your home’s real estate taxes as they come due, as well as your homeowners insurance policy premiums.
Failure to pay real estate taxes can result in foreclosure. Failure to insure your home is a breach of your mortgage loan terms.
There are two methods by which you can pay your real estate tax and homeowners insurance bills.
The first method is to pay your taxes and insurance as the bills come due, usually semi-annually. Depending on your home’s tax bill size and the cost to insure your home, these payments can feel quite large — especially if you’ve failed to budget for them properly.
The second method of paying your taxes and insurance is to give your lender the right to pay them on your behalf, a process known as “escrowing for taxes and insurance”.
When you escrow your real estate taxes and homeowners insurance, you pay a portion of your annual obligation to your lender each month, which your lender then holds in a special account for you, and disperses to your taxing entities and insurance company as needed. Lenders prefer that homeowners escrow taxes and insurance because, in doing so, the lender is assured that tax bills remain current and that homes stay insured.
Want a discount on your next mortgage rate? Tell your lender that you’re willing to escrow.
To help calculate your monthly escrow payment to your lender, do the following :
- Find your home’s annual real estate tax bill
- Find your home’s annual homeowners insurance premium
- Add the two figures and divide by 12 months in a year
The quotient is your monthly “escrow”; the extra payment you’ll make to your lender each month along with your regularly scheduled principal + interest payment. Then, when your tax bills and insurance premiums come due, your lender will make sure the payments are made on your behalf.
If you’re unsure whether escrowing is right for you, talk to your loan officer and/or financial planner. There are valid reasons to choose either path.
What should I expect from my insurance agent/agency when I buy a new home?
Insurance is a part of your home closing process. So, outside of being sure that you have an agent that cares about your purchase and protection, offers a reasonable rate and appropriate coverage, you want to make sure that there will be no hiccups in your closing process!
Some insurance companies have specific issues with certain properties that can cause a delay if they are not addressed in a timely manner. Consequences of not doing this include delays in closing your home, delays in financing,and even possibly losing your deposit and the home if you miss your close of escrow date.
A few examples of things that can cause delays in your insurance are:
- A house that has Knob and Tube wiring is extremely hard, if not impossible, to find coverage for and can cause delays in closing if it can even find the appropriate coverage.
- A house with less than 100 Amp service is again not going to be cheap, if its even available.
- If the property has un-repaired damage to it, especially if visible from the street, may cause an insurance carrier to cancel the policy.
- If there are tree branches touching the roof, or moss of the roof, you are in for difficulties with your insurer.
Making sure these obstacles are addressed before you get to the closing table is important! But, don’t fret! Good communication between your insurance agent, Realtor, loan officer and title company will be sure that your closing goes smoothly and all these issues are addressed and won’t be surprises later.
It’s always a good idea to be cognizant of these types of issues and be proactive in preventing them.
If you have any questions on this please feel free to contact me at ctrowbridge@farmersagent..com or 1-650-Farmers.
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Welcome to the new lender blog!
I have huge plans in store for this blog and there’s lots of stuff here you will not want to miss out on.
A few of the highlights will be:
Ask Mike
Here you can send any question you have about anything– yes even crazy questions– and I’ll do what I can to answer it! Want to know what I think about the market? Where it’s going? Any mortgage questions? My favorite color? Relationship advice? Just Ask!!
Guest Bloggers
We have an amazing line up of guest bloggers covering staging, design, insurance, escrow, and various real estate markets around The Peninsula and various other topics. It will be useful information for new home buyers, refinancing homeowners, real estate agents, and anyone else connected with the market. Stay tuned to see our blogger profiles and learn all kinds of useful information!!
Area Information
We’ll soon be launching a companion site that has a ton of information on different areas around San Francisco and The Peninsula including school information and county information. We’ll also have all kinds of vendor information and deals for our readers! It’ll be a one stop shop for all your home maintenance needs! Are you a vendor and want to be part of it? Just send me an email!
How it Works
For the people who want to know how the process of mortgaging, insurance, escrow, real estate and other things happen…while up-to-date with changes to regulations and rules. This will be a first stop for information about how it should be done RIGHT now matter what it happens to be.
Market Updates and Information
We’ll also have our usual daily blogs about the mortgage market and information on what is going on and how it’s going to affect agents, buyers, and sellers. Keep yourself in the know by checking it out everyday!
What is Your Home Worth
We’ll be bringing you up-to-date marketing information that can affect the value of your home. You can always get our home evaluation estimate on the right side of our page!
There will be so much more that will be happening on the blog– these are just a few of the highlights.
Stay tuned, you won’t want to miss this!
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