Why does my Mortgage Company collect and pay your home insurance?
If you have a mortgage, you’ve probably noticed that your lender (like us) collects payments for your home insurance and property taxes as part of your monthly mortgage bill. This money goes into an escrow account, which we use to pay these expenses on your behalf. But why do we do this?
Protecting Our Investment (and Yours)
When a mortgage company lends you money to buy a home, we have a vested interest in protecting that property. Home insurance ensures that if your home is damaged or destroyed, neither of us suffer a total financial loss. By collecting insurance payments and paying the premium directly, we can ensure the policy stays active—reducing the risk of lapses due to missed payments.
Convenience and Budgeting
Instead of facing large, once-a-year insurance bills, escrow spreads the cost across 12 months, making it easier to manage your budget. We calculate how much is needed and adjusts your escrow balance accordingly, so you’re not hit with unexpected expenses.
Lender Requirements
Most mortgage agreements require home insurance and specify that the lender will handle payments. This ensures compliance with the loan terms and provides peace of mind for all parties involved.
While it may seem like an extra layer of control, lender management of your home insurance payments ultimately benefits you by ensuring continuous coverage and simplifying your finances. If you have any questions about escrow or about our direct-lender advantage, we’d love to have a no-pressure conversation.
– The United Faith Mortgage Family
