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CHAPTER XII -- YOU'VE MADE IT! CLOSING DAY

LESSON 23: ESCROW (IMPOUND) ACCOUNTS

In the last lesson, we mentioned that borrowers sometimes have to pay money into escrow accounts (also called "impound" accounts in certain parts of the country) at closing. But what exactly are they?

MythSome people think borrowers with long-term, fixed-rate loans will always pay the same amount each year. False: The amount they pay will sometimes fluctuate from year to year. The culprit that unfixes the fixed loan is the escrow account.

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In essence, these accounts protect lenders from borrowers who forget or choose not to pay real estate taxes and insurance premiums. Lenders don't want local tax authorities putting liens against their borrowers' houses for unpaid taxes. Nor do they want hurricanes to wipe out their collateral only to find out that the homeowner's policies had lapsed because those customers never paid their insurance bills. So, they require borrowers to establish these accounts and pay a portion of their yearly tax and insurance bills into them each month.

Remember

Tax assessment or rate changes and insurance premium adjustments can happen any time over the course of 12 months. Your escrow payments generally remain constant for a year at a time, but then can adjust regardless of whether you have a fixed-rate loan or an adjustable-rate loan.

(continued on next page)

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

CHAPTER I
  Lesson 1
  Quiz

CHAPTER II
  Lesson 2
  Quiz

CHAPTER III
  Lesson 3
  Lesson 4
  Lesson 5
  Quiz

CHAPTER IV
  Lesson 6
  Lesson 7
  Quiz

CHAPTER V
  Lesson 8
  Lesson 9
  Quiz

CHAPTER VI
  Lesson 10
  Lesson 11
  Quiz

CHAPTER VII
  Lesson 12
  Lesson 13
  Lesson 14
  Quiz

CHAPTER VIII
  Lesson 15
  Lesson 16
  Lesson 17
  Lesson 18
  Quiz

CHAPTER IX
  Lesson 19
  Quiz

CHAPTER X
  Lesson 20
  Quiz

CHAPTER XI
  Lesson 21
  Quiz

CHAPTER XII
  Lesson 22
  Lesson 23
  Lesson 24
  Quiz

CHAPTER XIII
  Lesson 25
  Lesson 26
  Lesson 27
  Quiz

CHAPTER XIV
  Lesson 28
  Lesson 29
  Lesson 30
  Quiz

Definitions





RELATED STORIES

The purpose of escrow accounts


Why consumers like and dislike an escrow account


Escrow makes payments -- even on fixed-rate mortgages -- variable

 
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