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Escrow Credits Explained

Definition
An escrow credit is a deposit into your escrow account and may be used by you for any purpose. Most mortgage applicants choose to use the credit as a means of paying some or all of their mortgage non-recurring closing costs.

Where It Comes From
An escrow credit is placed into your escrow account by the lender per instruction from your mortgage broker.

Why It Is Popular With Homeowners
Mortgage transactions can be expensive due to the variety of fees associated with your loan. Fees such as those charged for appraisal services, escrow service, loan documents and title insurance can easily run into the thousands.

An escrow cash credit relieves the mortgage applicant from some or all of these expenses.

Summary
Escrow credits do not suit all transactions. However, in the case of a refinance, and in the case where a homeowner is lowering his/her payment, a transaction without fees (or with reduced fees) can be a convenient way to realize immediate mortgage savings.


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