An escrow account held by a mortgage lender typically collects monthly payments to cover:
Correct Answer
B) Property taxes and homeowner's insurance premiums
A lender-held escrow account collects a portion of the borrower's monthly mortgage payment to cover property taxes and homeowner's insurance premiums. The lender disburses these funds on the borrower's behalf when they come due. This protects the lender's collateral interest by ensuring taxes and insurance are kept current.
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Related Topics & Key Terms
Related Topics:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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