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Escrow Accounts

Banking for Individuals

mortgage escrow accounts

WHAT IS AN ESCROW ACCOUNT?


A mortgage escrow account is usually required and established by the bank to hold funds collected from the borrower to pay taxes and insurance premiums on the property securing the loan.

Escrow accounts are not required in every state. Most commonly referred to as non-escrow states, these states follow a traditional closing method where documents are signed and monies are exchanged at the closing with all parties present. Escrow states require a third-party to be present at closing to ensure the transfer of ownership is in accordance with the written contract agreed upon by all parties.

As a mortgage provider in Pennsylvania, New Jersey, Delaware, and Ohio, these states require escrow accounts, but there are differences in the third-party members required to handle the transaction. 

  • Delaware: attorney
  • New Jersey: northern NJ - attorney; elsewhere - title agents
  • Ohio: title company or lender
  • Pennsylvania: title company, real estate agent, or attorney

The balance in your escrow account pays for your property taxes such as county, township and school taxes as well as your homeowners insurance and/or private mortgage insurance premiums.

The bank determines how much your taxes and insurance premiums will cost on a monthly basis and then adds that amount plus a 2 month cushion for each bill to your monthly mortgage payment. When you make your monthly mortgage payment a portion goes toward the principal and interest on the mortgage loan and the remaining amount is used to fund your escrow account. 

When taxes and insurance bills are due, the bank uses the funds in the escrow account to pay these bills on your behalf. This guarantees your bills are paid in full and on time. In some cases, certain bills will be sent directly from the tax office or the insurance company to the paying bank. In other cases the homeowner is responsible to submit these bills to the bank for payment. Regardless of how the bills are submitted, it is the homeowner’s responsibility to make sure payment has been made. If tax bills are submitted in timely fashion, the bank will pay the bill based on the discounted value. If the bill is sent to the bank after the discount period has ended, they will pay the face value of the loan and, in some cases, charge an additional fee.

Your escrow balance reflects the total of your monthly payments minus any funds that have been deducted to pay for your taxes or insurance premiums. Because taxes and insurance premiums can vary, there is no minimum balance requirements for escrow accounts. However, banks can keep a 2-month cushion for each bill to ensure changes to your taxes and insurance premiums are covered.

Your monthly Univest mortgage statement will only reflect your monthly escrow payment and the total of your year-to-date payments to your escrow account. If a bill was paid in a particular month, the statement will reflect the amount and the date the tax or premium was paid

The bank will conduct an annual escrow review to ensure they are collecting enough funds to cover any adjustments to your taxes, insurance premiums and other bills that are paid from your escrow account.

In some cases, there may be a shortage in the escrow balance. If a shortage is discovered after the review, the bank will notify you and provide you with two options:

  1. You can pay one lump sum to the escrow account to ensure the escrow balance will cover future taxes and insurance premiums
  2. You can elect to increase your monthly escrow payment, which in turn, will increase your monthly mortgage payment.

On the rare occasion there is an overage of funds in the escrow account, you will receive a check for the difference. Banks, by law, can only hold a certain overage in the account.

If you have Univest Online Banking, you can view your monthly statements online.

To view your mortgage statement online:

  1. Login to Univest Online Banking
  2. Select the eDocuments tab
  3. From the drop down menu select “Mortgages” for “View Statements/Notices For”
  4. A list of your most recent mortgage statements will appear. Determine which statement you would like to view and click “View”.

An escrow account is typically established when you close your mortgage loan; however, you can open an escrow account at any time by contacting your lender. Talk to a Univest lender and learn more about opening an Escrow account today!

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