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.