Finance
When a lender requires a borrower to maintain a certain amount in an escrow account for taxes and insurance, the monthly escrow payment is calculated by:
ADividing the annual tax and insurance costs by 12✓ Correct
BAdding 10% to the monthly mortgage payment
CSetting aside 2% of the loan balance annually
DUsing the previous year's tax bill as the monthly payment
Explanation
The monthly escrow payment for taxes and insurance is calculated by taking the total annual costs for property taxes and insurance premiums and dividing by 12 (months). This amount is added to the monthly P&I payment.
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