Escrow account is an account wherein the creditor accumulates the monthly Taxes from borrower and then makes the payment to the County on its due dates.
In the given example, the creditor needs to make the quarterly payments i.e. 4 payments in a year. which means at every due date he will make payment of 3 months. because 12/4 = 3.
However, before the first payment starts, the creditor calculates how many months of impound/escrow needs to be taken for the future due dates..
The monthly Payment by the borrower starts on 1/1/2018
Let's assume the tax due dates are 1st Feb, 1st August, 1st October and 1st December.
I have attached the worksheet for your better understanding of the situation.
considering the payment started from Jan, by February only two months payment would be collected. Hence there is a shortage of one month..
Similarly on 1st August, 6 months of escrow would have been collected. Hence there is no shortage instead, there would be extra payment of 3 months.
The same excess would get adjusted in the October payment and December payment. In OCtober and December there would be a shortage of one month each as only 2 months would be collected by then.. i.e. (September-October) and (November-December).
Please let me know if any extra info needed.
The same question has been posted here. However, the explanation given here is a bit better.
https://www.mrexcel.com/forum/excel-questions/1050253-mortgage-escrow-reserve-calculation.html
In the given example, the creditor needs to make the quarterly payments i.e. 4 payments in a year. which means at every due date he will make payment of 3 months. because 12/4 = 3.
However, before the first payment starts, the creditor calculates how many months of impound/escrow needs to be taken for the future due dates..
The monthly Payment by the borrower starts on 1/1/2018
Let's assume the tax due dates are 1st Feb, 1st August, 1st October and 1st December.
I have attached the worksheet for your better understanding of the situation.
considering the payment started from Jan, by February only two months payment would be collected. Hence there is a shortage of one month..
Similarly on 1st August, 6 months of escrow would have been collected. Hence there is no shortage instead, there would be extra payment of 3 months.
The same excess would get adjusted in the October payment and December payment. In OCtober and December there would be a shortage of one month each as only 2 months would be collected by then.. i.e. (September-October) and (November-December).
Please let me know if any extra info needed.
The same question has been posted here. However, the explanation given here is a bit better.
https://www.mrexcel.com/forum/excel-questions/1050253-mortgage-escrow-reserve-calculation.html
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