What is an escrow company used for? An escrow has several different advantages. But first, I will tell you what an escrow is. Escrow is a deposit, which is made in a certain amount that is saved to be paid to someone or for something when the occasion is due or ends. Here are several examples of what an escrow is used for.
Saved for a year to pay property taxes
Saved for a year to pay homeowners insurance
Saved to pay for college
Saved to pay land contract payments yearly
Whatever reason you have the escrow set up; the money can only be withdrawn for this reason and no other reason. You cannot withdraw the money for a bounced check or something like this. Many lenders will set it up along with your mortgage and have it in their bank. They will withdraw it at the time it is due and pay it for you. The advantage of this is that you cannot spend the money and you will know your taxes, insurance, or whatever is paid on time and you do not have to worry about it.
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