Impounds and escrow reserves

Today we’re going to go over what are impounds and escrow reserves and why it’s important to know well what these two are in the process of buying a new home.

What is an escrow impound account?

To protect their loan, mortgage lenders usually require borrowers to fund an escrow account,which is an account that you can get with you home loan and will take care of paying property taxes and insurance for you, so that you don’t have to worry about your property taxes always being paid on time.

The Escrow Reserves

When someone applies for a mortgage, the goal is usually to gain that financial security that home ownership gives you.

For that reason, lenders almost always protect themselves by requiring an escrow account, out of which they pay the essential expenses of property taxes and insurance. Though this ensures these payments continue, they also set up a reserve, funded 100 percent by a portion of your monthly payments.

The mortgage company sets up a reserve fund to ensure the escrow account has sufficient funds to pay expenses, even if the borrower starts missing payments.

The terms “reserve” and “escrow” are quite similar at the end of the day,since there have not been any payments yet made for taxes and insurance yet. The lender sets up the escrow account by setting the reserve at 14 months usually of payments for insurance and taxes. The lender then subtracts the number of months until the first payment and charges you the balance at closing.

So that’s all for today, hope you found this article useful so far and don’t hesitate in reaching me out if you have any questions or need a consultation.

Stay hungry and stay positive!

Make it a great day,

Sean La Rue


Instagram: @seanlaruehomeloans


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About Sean La Rue

Sean lives in the Palm Desert area and works with Franklin Loan Center as the Senior Vice President. Sean is ready to provide you the concierge level-of-service experience in purchasing or refinancing a home in Palm Springs, Palm Desert, La Quinta, Rancho Mirage, Coachella, Indio, or anywhere in California. His commitment is to treat your home loan like his own because he cares about your family.

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