Impound Account - Answers the question 'what are impounds' - Explains Many
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What is an Impound Account?
These are accounts which lenders set up to collect "up-front" money from you when you take out a mortgage to cover future expenses such as property taxes and insurance. Lenders like to set up these impound accounts, as they are then certain that the property taxes and insurance will be paid on time, which protects their interest in your home by keeping title free of tax liens. If you do not want such an account is important to notify your broker up-front as most will automatically set up an Impound Account for you (Please note that there is often a cost of up to 1/4 Point for have Impounds waived on your loan). Many people actually prefer to have these accounts 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 them out evenly in monthly payments is more convenient.The disadvantage to impound accounts is that because the payments are collected up-front you always have an 'opportunity cost' with your money: Many people would prefer to have the money used for these 'advanced' payments in their own bank account or investment vehicles.
Should you have an Escrow 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.
What Are California Morgage Impound Accounts
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