How are a mortgage impound account and an escrow account related?


A mortgage impound account and an escrow account are one and the same thing.

Sometimes they are called a mortgage escrow impound account. This is the account the lender sets at closing and requires upfront payment of annual property tax and homeowners insurance to be placed in the escrow account.

Lenders would like to make sure that the mortgage escrow account has enough funds to cover for yearly taxes and insurance and will use a cushion. To avoid using an impound account when you have LTV less than 80 percent, you will have to ask the lender and may have to buy 0.25 points off the interest rate.

Sometimes when a loan is sold on the secondary market, you may lose track of the funds you are having in the escrow. Also, the lender may not be making payments on time and you may start receiving late charges and penalty notifications. If this happens, contact your lender to set things straight or require closing of the mortgage escrow account. Still, using an escrow is so much easier than having to worry about paying property taxes and hazard insurance yourself that many borrowers would prefer to use a mortgage impound account.

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