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Points Explained |
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What are morgage points and when, if ever, does it make sense to pay them? |
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Learn More  |
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Fees Explained |
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What are the 'real' costs of my Morgage? This will help explain exactly where your money is going -
and where it shouldn't be going...
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Learn More
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Morgage Glossary |
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Become an informed borrower by familiarizing yourself with common terms used throughout
the morgage process...
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Morgage Impounds...What's an Impound Account?
Morgage Impounds are accounts which are set up through an escrow company at the request of either the lender or a borrower.
These 'escrow impound accounts' essentially collect 'upfront' money for the purpose of covering future property taxes and/or insurance
expenses. Lenders prefer having impounds because these accounts make certain that the property taxes and insurance will be paid on time
and thus ensures that their interest in your home is protected by keeping the title free of tax liens. Keep in mind that most lenders
and brokers will automatically set up an impound account for you unless you specifically request that this not be done (Further note
that many lenders will penalize you up to 1/4 Point in fees for not having such an account). Also keep in mind that many people
actually prefer that Morgage Impound Accounts be set up for them so that they do not have to come up with large amounts of money
to pay for their taxes or insurance all at once; spreading the amounts evenly over the monthly payments is often more convenient.
A notable disadvantage to impounds is that because the payments are collected up-front there is always have an 'opportunity cost'
with your money: Many people would prefer to have the money used for these 'upfront' payments in their own bank account or
investment vehicles until the time is due to pay them.
So should you have an Morgage Impound Account? It really depends on if you prefer this convenience even if it's at the Opportunity
Cost of having this money in you own accounts.
Other Important Morgage Terms
Initial Rate -
The rate charged during the first interval of an ARM.
Morgage Interest Rate -
The periodic charge paid for borrowing money, calculated as a percentage of the amount borrowed.
Interest Rate Cap -
A safeguard built into ARMs to prevent drastic changes in interest rates.
Interest Rate Change Date -
Those dates upon which the rate of interest is subject to change. Initial change date and subsequent change dates may feature different terms.
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Morgage Impounds - What is it an Impound Account & is it right for you?
We don't sell your information to multiple morgage brokers and call it 'competition'
