All mortgages require a monthly payment. Typically, the monthly payment consists of the principal repayment, prorated property tax, prorated homeowner’s insurance payment and interest. Of these, your taxes and insurance payments are held in a trust account with the lender, called the escrow account. When you refinance a mortgage, existing escrow accounts are usually closed and a new one is opened specific to the new loan.
To better understand the advantages and disadvantages of escrow accounts and how they work, read below.