Please explain escrow account and homeowners ins

First time home buyer here and clueless lol. We are closing in 2 weeks and Im about to sign final forms. We prepaid our homeowners insurance for the year which led me to believe we didnt have to pay it this year. Mortgage broker says we still pay it monthly and that it goes into our escrow account to start building it. Im so confused! help lol.

Please explain escrow account and homeowners ins

Yeah. First year you pay entirely upfront, but yes starting with your first payment you will pay monthly insurance payments thereafter that are credited into escrow. I forget the exact reasoning but the bank probably wants to ensure the house is covered and there is no chance of lapse in coverage.

Please explain escrow account and homeowners ins

Also, when your insurance increases and when taxes increase you may get hit from time to time with an escrow shortage notice. When that happens you either write a catch up check or you have the option to spread the different into your monthly payment. Make sure you grieve your taxes every year too.

Please explain escrow account and homeowners ins

We used to escrow our insurance so yes, even though you paid the first year they start collecting towards next year's payment so that when next year's bill comes the bank has the money ready in your escrow account. Last time we refinanced they no longer offered to do that so now we just have to make sure we have the money ready to pay on our own.

Please explain escrow account and homeowners ins

pay attention to the increases in homeowners insurance and what your house "costs" to rebuild-- sometimes they charge you way more than they should and will adjust it. i get my homeowners insurance notice in august and call right away before they start charging it and the mortgage goes up.

Please explain escrow account and homeowners ins

Yes so you will prepay the year then be charged monthly to build your escrow account to pay the following year. There will be an increase yearly to keep up with rebuilding costs....

Message edited 11/17/2017 8:46:13 AM.

Please explain escrow account and homeowners ins

OK thank u everyone :)

Re: Please explain escrow account and homeowners ins

You pay the first year upfront because you have to pay for your insurance. Now you will be paying into escrow for it (plus taxes) so that a year from now, your escrow account has enough to pay the full amount of next year's insurance.

Just like a car insurance policy, you pay for it upfront, not during or after the coverage.

Please explain escrow account and homeowners ins

Yes, like everyone else you have to prepay the first year so the policy is paid for if you need to make a claim.