The pros and cons of an escrow account
Make a minimum 20% down payment on your purchase of a Spring Texas home and the choice of an escrow account will be yours. A less than 20% down payment forfeits the choice.
If the choice of an escrow account is yours, should or shouldn’t you establish it? What are the pros and cons of an escrow account?
- Easier to budget. Your monthly payment would include the principal and interest on the note, an estimated 1/12 of home owners insurance, and estimated 1/12 of your Spring Texas real estate taxes. You won’t be caught off guard by a large bill that you forgot to budget for.
- Fewer bills to pay. Your lender will pay your homeowners insurance and county, school, and mud real estate tax bills when they are due.
- Higher closing costs. Your lender may charge a fee to waive the escrow account.
- Higher prepaid costs. Your lender will require you to deposit 2 months of home owners insurance and 3 months of real estate taxes to establish the escrow account.
- Lost interest. Your monthly escrow payments are deposited into a non-interest bearing account.
There is no right nor wrong answer to the question of should you or shouldn’t you establish an escrow account. It all depends upon your personal preference.