Yes, there certainly is. If everything works as well as it should, the escrow service will save you the personal headache of keeping up with the property tax and insurance payments schedule all through the years of your mortgage. Even the loss of a certain amount to the interest that the lender is going to keep, will feel like a fair fee for good service. If the service is good… To determine whether it is, read about escrow trials and tribulations in my special article.

The system of mortgage escrow accounts was created with good intentions. On the one hand it was to make the lender happy, because the lender got some guarantee that no lien prior to his own will be put on the mortgaged property through taxes or insurance, on the other hand, it was to save the borrower the pain of large lump sum insurance and tax payments. Everybody was expected to be happy, and that’s how it has worked for many people since, but sometimes even the best-laid plans fail.

Ideally, the system works as follows: when you sign your mortgage contract, among other things you agree to trust the property taxes and insurance to be paid by the lender with the money from your special set up for this particular purpose escrow account. Thus, in the course of your mortgage’s life, every period mortgage payment will need to contain a certain extra amount that is deposited into your escrow account. When the time comes, the lender takes the initiative and pays the taxes and insurance premiums in a lump sum using the money accumulated in the account. In other words, you, as a borrower, don’t have to pay the bulk money yourself, you save it gradually, thus making the big payment less painful. Just fine, you’d say, but why do I need the lender to do it for me, if I feel quite capable myself? Read the rest of this article »

 Why do people refinance? All for different reasons, of course, but the most common ones are:

• To obtain a lower interest rate,
• To build the equity of their property faster,
• To change the type of their loan,
• To take advantage of an improved credit rating,
• To get some cash out of the equity already built in the home.

How does it work?

Obtaining a lower interest rate is probably the most popular reason to refinance. One may have an adjustable rate mortgage with a rate gone too high, or a high-rate mortgage resulting from negative points, or an above-the-average rate caused by the poor credit score at the time of the loan origination, or it may have been a very sensible loan all the way until mortgage market interest rates dropped. Refinancing in such and such like situations can save you quite some money, but you have to be very thorough in estimating the benefit. The main question is whether the amount saved will be worth the amount paid. The procedure of refinancing is not cheap, so you have to make sure, that the money you pay for it will not only return to you, but also gain you some profit as savings on the interest, as compared with your current loan.

One of the decisive factors is Read the rest of this article »