What Escrow Services Do for You

Perhaps one of the most misunderstood aspects of real estate transactions is the escrow payment. It’s a common part of most mortgages, and you’ve probably seen it itemized on your monthly statement. But do you know what purpose your escrow payment serves?

In typical residential purchases where financing is involved, a Purchaser’s escrow payment includes taxes and insurance that are added to the principal and interest installment payment to make up the total monthly mortgage payment. Escrow services may be optional in some types of loans, but are usually required. If you have a Federal Housing Administration (FHA) loan, you’re typically required to maintain an escrow account for the total term of the loan.

Over the lifetime of a mortgage, you’ll likely encounter changes in property taxes and insurance premiums, which means that your monthly mortgage payment can go up or down. The Real Estate Settlement Procedures Act (RESPA) mandates that the escrow payment be recomputed at least once every 12 months to account for any changes. In the event that rates go down, you may actually have a lower mortgage payment, and if rates increase, you’re usually given the choice of paying a higher monthly payment, or contributing a specific amount of additional funds to your escrow account to maintain the same payment. And with most mortgages, you’re free to contribute additional funds to escrow and/or principal without a prepayment penalty.

If you ever have any questions about your escrow account, feel free to contact your Mortgage Lender or the team at First National Title that assisted you with your real estate closing. We have hundreds of years of combined experience with real estate closings and transactions, as well as title searches and title insurance, and 1031 property exchanges. We’re ready to put that experience to work for you! We have 12 Convenient Arkansas locations to serve you, and take pride in our professionalism, and our commitment to customer service!

For more information, use our contact page or call your nearest office listed at the bottom of the page.