Mortgaged properties have the on-going liabilities of property taxes, homeowners' insurance and, if required, mortgage insurance and flood insurance. At closing, funds are collected to set-up the escrow accounts for these items.
When the mortgage payments begin, 1/12th the annual property taxes and insurances are collected in each payment. These funds are added to the escrow amounts collected at closing to pay the escrow liabilities as they become due.
Hazard (Homeowners') insurance premium escrow:
Mortgage insurance premium escrow:
Property tax escrow:
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