Your mortgage payment can allocate payment to several areas. Of course your payment’s primary function is to pay the principal and interest on your mortgage. However, there are some other portions of the payment allocated to your escrow account .
An Escrow Account is a separate “savings” account set up for you by the lender. Make no mistake, though, it does not earn interest. The sole purpose of this account is to have money from the total payment set aside for when it comes time to pay your property taxes, private mortgage insurance and homeowner’s insurance. It has no other purpose or function. So if you want a vacation and have no money, sorry you cannot tap that account. This way the lender can ensure that you have the money to pay the taxes and the insurance when they come due, plus it is worry free for you.
So take a look at that next monthly statement. There is a spot to tell you how the mortgage company is managing your escrow account.
Originally Posted by Lisa VanderLoo on 04/30/2011