Taxes & Insurance

Taxes & Insurance

Taxes and Insurance: Should You Create an Escrow Account?

Budget for Additional Monthly Payments Along with Your Mortgage Loan Installments
When you buy a new home, monthly mortgage loan payments are not the only financial responsibility you will have. Planning how to cover the additional expenses in advance will help you better manage all your financial obligations. 

Here are some common costs associated with a new home purchase.

Important Payments along with Your Home Loan Installments:

  • Property taxes: These are payable to your county or municipal government every year. The money helps fund education, road maintenance and construction as well as other community services. Rates will vary according to land value and jurisdiction.  
  • Home insurance: If you finance your home with a mortgage loan, your lender will require you to have home insurance coverage. The main purpose of this is to protect your investment in case of loss from a fire or natural disaster. 
  • PMI: If your down payment is less than 20% of the home's price, you are usually required to pay for private mortgage insurance (PMI) which protects the lender in case of default. Tip: Check with your mortgage professional if you can have the PMI removed when you reach 20% equity (with a written request and no late payments in the last 12 months). At 22% equity and 78% loan to value they automatically drop it.
  • HOA/condo fees: Certain types of residential properties like a condo or townhouse in a gated community require you to pay monthly fees for maintenance of common areas. These HOA/condo fees can range from $200 to $400 a month. The more upscale the community and more amenities you can access, the higher the payments are likely to be. Note:These are not escrowed by the mortgage company. 

Setting up an Escrow Account


Having an escrow account makes it easier to manage mortgage loan installments, property tax, home insurance, PMI and HOA payments. You can choose to go through your lender or an escrow company. Paying bills through an escrow reduces the risk of missed payments and default. Determine your annual/monthly costs and ensure you have the amount in your account. You will receive a statement at the agreed intervals, giving you a summary of the account activity.  

Not sure how to calculate all the costs associated with a new home purchase? We can help! At Dividend Mortgage, our professional team takes the time to understand your requirements and give you the information you need to make the right decisions. 

Call 269-321-8950 or contact us online to set up a consultation in Michigan. 
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