Escrow Accounts: Home-Buyer’s Best Friend

Escrow Accounts: Home-Buyer’s Best Friend

When a member takes out a mortgage, an escrow account is set up to pay for property taxes and insurance premiums. Payments into an escrow account are made monthly as part of your mortgage payment. When taxes and insurance premiums are due, we are responsible for paying for them and will use the funds from your escrow account.

The escrow account has many benefits, such as:

1. It’s easier to budget. The cost of taxes and insurance is spread out over the year and collected as part of your mortgage payment.
2. Peace of mind. We will certainly make sure those payments are paid in a timely manner.
3. It’s convenient. You don’t have to remember to send a check or pay the bills. We’ll do this for you.

Calculate your mortgage escrow payment: take your projected annual tax bill and divide by 12, the number of payments you will make throughout one year. For example: Abington County homeowner with a property value at $340,000 can expect to pay approximately $6,200 annually. The monthly escrow installment for taxes is roughly $517. You can also take your annual insurance premium amount and your mortgage insurance premium and divide them by 12 to come up with your monthly escrow payment.

Property taxes and insurance premiums change over time. Therefore, we perform an Annual Escrow Analysis to assess the funds available in your escrow account against your current property tax assessments and insurance premiums. We’ll review your escrow account to make sure you’ll have enough funds to cover these expenses. Your monthly mortgage payment may be affected due to the result of this analysis since property taxes and insurance premiums can change. To help with any unexpected increases, you always need to keep a minimum balance (cushion) in your escrow account. It’s calculated to not be more than 2 months of escrow payment. During the escrow account review, we assess how much will be in your account each month for the next 12 months. At its lowest point, if it’s projected to be:

1. Shortage – If you have below the minimum balance, you’ll have a shortage. This can happen if the taxes or insurance premium for the previous 12 months were more than expected. Or, if they’re estimated to go up in the next 12 months. You can make up a shortage in 1 of 2 ways:
a. Pay it in full. Send check for the full amount and we’ll put it in your escrow account.
b. Pay it over 12 months. We’ll add a portion to your monthly payment.
2. Overage – If you have more than the minimum balance, you’ll have an overage. This happens if your taxes and insurance premium for the previous 12 months were less than expected. Or, if they’re estimated to go down in the next 12 months. In most cases, we’ll deposit a refund check to your prime share account.
We will send you an Escrow Account Disclosure Statement annually to let you know of any changes to the account.

Please note, be sure to save money for your taxes and insurance if you choose to remove escrow.