It is fairly common for your mortgage company to pay for your taxes and homeowners insurance. This is typically called having your taxes and insurance escrowed with the mortgage payment.
How does this work?
The process is simple. For the first year, normally you will pay directly to the insurance agency. They usually will ask for the first year upfront as this is sometimes required by the mortgage company. Then the following years are handled as follows:
- You pay the mortgage company every month. This payment is for your loan on your home, a prepayment for your taxes, and a prepayment for your insurance.
- The mortgage company or bank gets the tax bills from your municipality (city or town) and from your insurance company, and they pay the insurance company.
- If the amounts are different than they expected them to be (taxes went up or your premium went down), they may decide to change your monthly mortgage payment for the following year by the right amount to adjust for the change.
What about my auto insurance?
Some people assume that because their mortgage is paying their home insurance, they will also pay their auto insurance as well. As nice as that would be, this is not the case. Even if the two policies are packaged (or bundled) together, the mortgage company only takes responsibility to pay the homeowner’s policy. You are responsible to set up a separate payment plan for your auto policy. Many auto carriers offer a variety of payment options including pay-in-full, monthly, quarterly, and more. They also allow for auto withdrawal from your account so you don’t ever have to worry about missing a payment.
Still have questions or want to learn more? Reach out to us! We can be reached at (603) 273-0953, or visit our website at keslarinsurance.com.
