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The Most Common Questions About Escrow Answered | Virgie Vincent
- 1. THE MOST COMMON QUESTIONS A B O U T E S C R O W A N S W E R E D V I R G I E V I N C E N T
- 2. WHAT IS AN ESCROW ACCOUNT? An escrow account is an account set up by a lender to automatically save money for major expenses that a mortgage borrower will have to pay over the course of a year. The purpose of an escrow account is primarily to protect the lender.
- 3. IS AN ESCROW ACCOUNT REQUIRED? An escrow account is usually required by a lender as a condition of receiving a loan. As noted in the answer above, a lender wants to protect itself against the eventuality that a borrower might not keep up with tax and insurance payments.
- 4. CAN ESCROW PAYMENTS INCREASE? Escrow requirements can definitely increase over time. Houses are reassessed periodically to determine how much tax a homeowner will owe. When the assessed value of a home goes up, the tax owed will likely go up as well.
- 5. ARE PROPERTY TAXES IN ESCROW DEDUCTIBLE? The money in an escrow account that goes toward property taxes will generally be tax deductible. However, it’s important to remember that there are two stipulations tied to the ability to deduct the property taxes paid from an escrow account. First, the borrower must be able to itemize to actually benefit from the deduction. Second, there are limits to the available deduction.