Real Estate Community Forum

I am in the process of purchasing a home and someone mentioned that I should consider setting up an escrow account. I have no idea how an escrow account works and what it means. Can someone here explain to me what is an escrow account and how can it benefit me?

An escrow account can be used when you have additional expenses on your home such as homeowners insurance and property taxes. Basically, your mortgage lender will suggest that you to open an escrow account to cover these expenses. You'll pay your monthly mortgage, followed by payments towards your home owners insurance and property taxes. The escrow agent will then release these funds when your taxes and insurance payments are due. This is an excellent way to manage your money by making monthly payments rather than one lump sum such as $2,500 for property taxes. It is much easier to pay $250 per month which will eventually accumulate to $2,500 at the end of the year. Does this make sense?