Understanding Escrow

Escrow accounts and how they work.

Understanding Escrow

What is escrow?
Escrow is a separate amount collected along with your scheduled mortgage payment. The funds are collected to pay your future annual insurance premium and/or taxes. The funds accumulated in the escrow account may not be used for any other purpose.
What are the benefits of having an escrow account?
An escrow account allows you to set aside funds for your annual insurance premiums as well as taxes (if applicable) without the burden of providing the total balance upon policy renewal and/or notice of taxes due.
What is an escrow agreement?
An escrow agreement is an agreement between the lender and the customer to collect funds to pay insurance and/or taxes. This agreement is signed at loan closing and is binding for the life of the loan.
Is an escrow account required?
Yes. Vanderbilt assumes responsibility for maintaining your insurance and/or taxes. Because the escrow agreement is valid for the life of the loan, the escrow payment may not be discontinued.
Why do I need homeowner’s insurance?
Insurance coverage is required to protect you, as well as the lender, against physical damage and/or loss of value to the home.
How is my initial escrow payment calculated?
Your initial escrow payment will be equal to 1/12 of the total disbursements payable throughout the year. If you are on a biweekly payment plan, your escrow payment will be 1/26 of the total disbursements payable throughout the year.
Will I be escrowed for taxes?
The state of Texas requires lenders to escrow taxes for loans with contract dates after June 18, 2003. If you entered into a Tax Escrow Agreement in another state, you will have an escrow payment for taxes.
What is Escrow Account Analysis?
This is an annual review of your escrow account performed by Vanderbilt to determine if your current escrow payment is sufficient to pay your insurance premium(s) and/or taxes. The Escrow Analysis is conducted approximately 45 days prior to the anniversary date of your loan. Adjustment(s) to your escrow payment as well as any refund amount due to you will be determined at this time.
What is an Escrow Account Disclosure Statement?
This is an annual report distributed in accordance with the requirements of the Real Estate Settlement Procedures Act (RESPA). The Disclosure Statement will provide you with a detailed summary of your escrow account.
Could my escrow payment change more than once annually?
Yes. Because your escrow payment is determined by your insurance policy premium, it may adjust with any changes to your coverage and/or insurance company. An increase in your insurance premium requires an increase in the escrow payment. Likewise, a decrease in your insurance premium requires a decrease in the escrow payment.
What is an Advance?
An “advance” is a separate amount that is collected along with your scheduled mortgage payment for any expenditure that Vanderbilt paid on your behalf for items not described in your escrow agreement such as delinquent property taxes, Lender Placed Insurance Policies, etc.
Can my account have both an Escrow and Advance payment?
Yes. For example, you may have a total monthly escrow payment based on both insurance coverage and delinquent taxes paid by Vanderbilt on your behalf. The payment for insurance would be considered your Escrow Payment, and the additional payment for delinquent taxes paid on your behalf would be considered an Advance.
What happens to the money in my escrow account when I pay off my loan?
Any surplus balance in your escrow account will be refunded to you.
Will Vanderbilt contact my insurance company before my insurance policy expires?
No. It is the responsibility of our customer(s) to ensure that Vanderbilt receives proof of insurance coverage on the home annually.
What should I do when I receive the renewal notice from my insurance company?
Review the notice to confirm that Vanderbilt Mortgage is listed as the Mortgagee. Please note that your Vanderbilt loan number must appear on the policy declaration page to ensure both efficient customer service and accurate coverage information. If Vanderbilt Mortgage and Finance, Inc. ISAOA/ATIMA is listed as the Mortgagee, your insurance company will automatically provide a copy of the renewal notice to our office. Should you determine that Vanderbilt is not the established Mortgagee, please contact your insurance company immediately.

If you have questions and/or concerns regarding your escrow account, or if we may be of additional service, please do not hesitate to contact our office at the following telephone number and time(s):


8:30 a.m. to 8:00 p.m. (ET), Monday-Thursday

8:30 a.m. to 5:30 p.m. (ET), Friday

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Fri: 8:30am - 5:30pm ET

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