Purchasing a new home is a major milestone for you, your family, and especially your bank account. Like most homebuyers, you probably financed a large chunk of your purchase and must now pay a mortgage payment each month. Ann Irons, a CPA who offers escrow accounting in Bellingham, MA, explains relationships between your mortgage and escrow accounts.
Understanding Mortgage Interest Rates
Choosing an adjustable-rate mortgage means preparing yourself for possible changes in the amount you pay per month; interest rates often change each year. This option is especially popular when rates are low, and because lenders frequently offer an initial “teaser” period during which interest rates are lower. Irons adds that an adjustable-rate (also called variable-rate) mortgage can help buyers offset the rising cost of homes.
The opposite is a fixed-rate mortgage, which appeals to homebuyers who prefer more consistent payments and security. Because they know how much their monthly payments will be, they find it easier to budget and plan for the expense.
A Neutral Third Party
When you take out a mortgage, a special escrow account must be created. The purpose of the account is to cover your real estate taxes and homeowners insurance, if required by your lender. Establishing an escrow account offers several benefits, most notably the assurance that these required expenses will be paid on time and in full; managing and documenting these payments on your own can be overwhelming. Irons provides escrow accounting services for real estate lawyers and can help you navigate the process of maintaining the account.
Agents of Change
Several factors affect changes in interest rates and real estate taxes. For example, some states require a property to be assessed or reassessed at the time of sale, during construction, and following extensive renovations. Homeowners can also request a reassessment to determine the fair market value, or FMV. The FMV varies significantly by year, especially in volatile economic conditions. Some states have established limits on the yearly percentage increase in property taxes.
Need more info on escrow accounting in Bellingham, MA? To learn more about our accounting and tax services, or to meet with Ann Irons, CPA, LLC, contact us at (508) 966-0700. Irons, who has significant accounting experience and a degree in taxation, welcomes businesses, individuals, and law offices in and around Bellingham, Woonsocket, Milford, Medway, Worcester, and the surrounding areas.