What is an Escrow Account? An Escrow Account is a non-interest bearing account specifically for the purposes of collecting property taxes and Homeowners Insurance.
For property taxes, we determine your monthly amount by dividing the previous year’s tax bill by 12. Then, at the end of the year when your taxes are due, your Escrow Account will send a check to your local taxing authority.
Homeowners Insurance works out a little differently. It’s the same because it’s your yearly premium divided by 12, collected monthly. But it’s different because your full year’s premium is collected up front at the closing.
After you’ve made your first 12 payments, your Escrow Account will send a check to your insurance provider for your next years’ premium.
And that is an Escrow Account!