Posted 4 years, 9 months ago

An escrow or impound account is an account that you can set up at closing to pay your property taxes and homeowner’s insurance.  Property taxes are typically paid two times a year while home insurance is paid once a year.  With an impound account, the annual cost of your property taxes and insurance are divided into twelve equal payments and added to your monthly mortgage payment.   

Pros and Cons

Impounding property taxes and insurance can be advantageous.  By spreading the cost for property taxes and home insurance gradually throughout the year, you avoid the sticker shock of paying the large bills once or twice a year and are assured that the money will be there when the bills come due.

However, some homeowners would rather set money aside in an interest-bearing account and pay their property taxes and insurance independent of their mortgage payment.  Not all states require lenders to pay interest on the money held in impound accounts and those that do may not pay as much as individuals could earn by investing the money on their own.

Required Mortgage Impounds

Low down payment loan programs, including those offered by FHA and VA, typically require an impound account.

Monitoring Your Impound Account

Your monthly mortgage statement will show the balance in your impound account, making it easy for you to keep a close eye on it.  

Is an Impound Account Right for You?

For many homeowners, impounding property taxes and insurance works great and they would have it no other way.  Others feel that paying their property taxes and insurance independent from their mortgage payment makes better financial sense.  It ultimately comes down to personal preference and what makes you most comfortable. 

We hope that you find this information beneficial.  Please feel free to contact us if you have any questions regarding whether an impound account makes sense for you.

-The Kavanewsky Team