Every homeowner has agreed and contracted to a great financial responsibility when purchasing a home. The fiscal responsibilities go much further then simply making your mortgage payment. Additionally you are required to pay real estate taxes as well as insurance premiums.
Failing to pay your taxes or insurance premiums may result in huge penalties including foreclosure and violating your mortgage agreement. There are primarily two ways which homeowners pay their taxes and insurance bills.
One straight forward way is to pay the bills as they come due. Often it’s annually or semi-annually. Depending on your home and where you live the bills could be quite a bit and may require special consideration for budgeting your money to cover the costs.
The other very popular option and very simple is to simply “escrow” your payments. Your lender has the right to pay you bills for you and will do so by collecting your insurance and taxes at a even monthly payment. Many mortgages will also require that your taxes and insurance are collected in a separate escrow account to ensure that your responsibilities are met.
Your escrow payment will be in addition to your mortgage payment that only includes principle and interest. If you have any questions simply ask your loan officer or your bank if you’ve already closed on your loan about setting up an escrow account to simply your budget and funds.