Impounds

Impound Accounts:

Impounds  are accounts held on your behalf by the lender for the specific purpose of collecting funds to pay future expenses associated with your home….. property taxes and hazard insurance.  On occasion impound accounts are required in order to qualify for a particular mortgage program.  More often than not though, you have the option as to whether or not you want impounds.  Impound accounts are always an advantage to the lender and because of this you may receive incentivized pricing on your mortgage rate for accepting them.

Impound accounts work in the following way, your yearly property tax bill is divided by 12 along with your homeowner’s hazard insurance premium. This amount is added to your monthly mortgage payment.  Instead of making the twice yearly payments for taxes and insurance premiums, you pay every month along with your mortgage payment.  The lender places the monies received in their own impound accounts on your behalf.  The down side to this is you do not get to manage that money, they do.  In addition, by establishing impound accounts at the time of financing, one increases the cost of closing because you are required to deposit a specific number of months of payments to bring you current with the current bill cycle.  This can be discussed, and should be, in detail with you mortgage loan consultant.