SEE ALSO: What To Expect When Youre In Escrow
Pros Of An Escrow AccountIf youre not the saving type, an escrow account could keep you from scrambling when tax and insurance payments are due. Additionally, without an escrow fund, you risk facing the temptation to use the money for pleasure instead of saving it to meet your obligations. Lenders are also responsible for automatically adjusting monthly payments to make up for any changes in real estate taxes or insurance costs. Your lender will give you an annual escrow statement that details every withdrawal and the payments made. If you sell your home or refinance your mortgage, youll receive a refund if you have an available balance.
Cons Of An Escrow AccountBelow are some disadvantages of an escrow account:
- You could use the money in the escrow fund as an investment to gain interest instead of letting it sit in an idle account. Though some lenders pay interest on escrow funds, most do not. This varies by state.
- Though most lenders pay bills on time, theres always a chance of a late payment. Your lender is responsible for any late fees, as long as you pay your mortgage on time. Should your insurance company cancel your policy because of your lenders late payment, you can sue.
- Your lender may charge you a fee to cancel your escrow account. In some cases, you can request a waiver if you have a solid payment record.