What is an escrow account?

An escrow account is an account held by a third-party, such as a bank, that holds money on behalf of two separate parties involved in a transaction. In the context of mortgage law in Maine, an escrow account is typically used in home purchase transactions. The buyer and seller establish an escrow account and the seller deposits their portion of the purchase price, usually at closing. The escrow account is usually managed by the buyer’s bank and is used to cover the buyer’s closing costs, such as closing fees, real estate taxes, and home insurance. The bank held money in the escrow account is then released to the seller at closing, after the buyer pays all the closing costs. The escrow account also ensures that the buyer’s closing costs are paid directly to the seller and that the buyer is not at risk of defaulting on their mortgage loan. It is important to note that an escrow account is not an escrow payment, which is a single payment that can be made each month to cover all the expenses associated with a property such as taxes, insurance and mortgage payments.

Related FAQs

What is an adjustable rate mortgage cap?
What are the benefits of a mortgage?
What are the eligibility requirements for a mortgage?
What is the process for applying for a mortgage?
What is the difference between a rate lock and a float-down?
Does the interest rate on my mortgage change over time?
What is refinancing a mortgage?
What is a first mortgage?
What is loan origination?
Are there any special mortgage programs for low-income families?

What is an escrow account?

Related FAQs

Related Blog Posts