3 Benefits Of Paying Your Homeowners Insurance Through Escrow
Posted on: 23 July 2018
Many homeowners purchase and pay for their own homeowner's insurance policies separately from their mortgages. However, there is another option that works well for many people: paying their homeowner's insurance in escrow. Basically, what this means is that your homeowner's insurance premiums -- and possible your property taxes -- will be included in your monthly mortgage payment.
Then, these smaller amounts of money will be held in escrow and will be used to make your homeowner's insurance and property tax payments for you. Even though this might not be how you are used to handling things, it can be a beneficial system. These are a few reasons why.
1. It Can Help You When Securing Your Mortgage
For one thing, you should know that many mortgage companies like it when their customers choose to open up escrow accounts into which they can make payments for their homeowner's insurance and property tax payments. After all, then the mortgage company knows that you are planning on staying up-to-date on these important payments. If you're a bit concerned about getting your mortgage application approved or if you are hoping that you can get a better interest rate than what you have been offered so far, this can be one way to get on your potential lender's good side.
2. Make Planning and Budgeting for Home-Related Expenses Easier
Next, as someone who is thinking about buying a home or who already owns a home, you probably already know that budgeting for things like homeowner's insurance and property taxes can be challenging. By making payments into escrow, however, you can break these payments up into smaller, more manageable and less overwhelming chunks.
3. Avoid Accidentally Spending the Money
Some people have a hard time keeping money in their savings accounts. If this sounds like you, then you might be worried that you will end up accidentally spending the money that you are trying to set aside for your homeowner's insurance. If this money is put into an escrow account through your mortgage lender, however, you do not have to worry about making this mistake. This can help you avoid problems with your homeowner's insurance later, such as an insurance lapse.
As you can see, there are a few benefits that go along with paying your homeowner's insurance through escrow. If this isn't something that you have considered yet, consider talking to your mortgage lender to determine if this is an option.
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