Life is unpredictable. From illness to divorce to job loss, many factors can take a toll on your income that can leave you struggling to pay your monthly mortgage payments on time. If you have lost your job and are unable to make your monthly mortgage payments, job loss mortgage insurance can help cover those […]
Using Escrow Accounts to Manage Mortgages in KC
Managing your mortgage can be a daunting task, even to seasoned homeowners. In an effort to simplify yearly fees for insurance and taxes, lenders often suggest escrow accounts to help streamline multiple payments. Many people with mortgages in KC rely on escrow accounts to help pay the right amount of money to the right people at the right time.
The Difficulty of Yearly Insurance & Tax Fees
In addition to mortgage payments, homes require insurance and tax payments in order to function in the real estate market. Unlike monthly payments for mortgages in KC, insurance and taxes are paid once a year.
This approach may sound appetizing until you realize you have to pay several thousand dollars all at once. You may start to question if you’ll remember to save that amount of money for that one time payment each year or if that money’s long term availability will make it too enticing to spend on something else.
Making Annual Payments More Convenient
Escrow accounts are one way to ensure taxes and insurance are covered every year for mortgages in KC. Each month you pay a fraction of your annual fees plus a convenience fee to a neutral third party. This third party is not your lender, but instead they are escrow agents, title agents, or closing attorneys. They are responsible for accumulating your monthly installments and making your yearly insurance and tax payments.
The regularity of monthly as opposed to yearly payments helps people manage annual fees. In addition, the third party in charge of your escrow account is responsible for dispersing your money to the right place. That means less forms for you to fill out on a regular basis.
How Necessary is an Escrow Account?
Escrow accounts are not for everyone, although some mortgages in KC require you to have one. If you have the choice, consider the following questions:
- Am I willing and able to save the full amount of money throughout the year in order to make annual payments?
- Is a riskier alternative—such as investing the saved money—more appealing to my lifestyle?
- Would I prefer the convenience of making monthly payments rather than yearly payments?
- Would I prefer the convenience of a third party dispersing my money to the correct accounts?
Your answers will help you decide whether you should rely on an escrow account to manage your mortgage.