June 14th, 2023 10:53 AM by Salim (Sam) Kader MLO# 130505
• First installment is due on April 30th and becomes delinquent on May 1st. This payment covers the tax period from January 1st through June 30th.
• Second installment is due on October 31st and becomes delinquent on November 1st. This payment covers the tax period from July 1st through December 31st.
The amount in the escrow account varies during the year due to property tax assessments and property insurance premium adjustments. Due to these adjustments - your monthly mortgage payment will fluctuate from year to year even on long-term fixed-rate loans (with impound account - your monthly mortgage payment consists of Principal, Interest, and 1/12 of your property taxes and property insurance). Over the years, the lender typically will cover any shortfalls until it can adjust your monthly payment to make up for tax hikes and premium increases. Here's an example of escrow account analysis statement to determine when you have a shortfall.
In some cases you can avoid escrow. Some lenders let you to pay your property taxes and home-insurance premiums especially if the loan-to-value ratio is below 80 percent. However, the lender may boosts the interest rate to compensate for the additional risk it is assuming. Once an escrow requirement is in place, it can be difficult to cancel it. If your loan is sold; as is common and there is nothing in the lender agreement that provides for cancellation of the escrow requirement you will have to live with the decision of your new mortgage servicer. Federal Housing Administration (FHA) insured mortgages require escrow accounts.
Escrow account or not? Here are some guidelines:
d. Whose responsibility is it? With an escrow account - it's the lender's responsibility to pay all of your tax bills in a timely manner. Lender will also be responsible to penalty should it occurs.
If you do not have an impound/escrow account set-up - section G of Closing Disclosure (CD) will show 0 balances and escrow account section will indicate that you declined having escrow account.