While paying Home Mortgage and Real Estate taxes to Financial Institutions, we are getting interest from the institution (interest on Escrow). Can you tell me actual concepts or meaning of interest on escrow and taxability?

Thanks,

Syed Thameem

Most mortgage lenders require that you pay them a monthly amount to cover taxes and insurance. These amounts are then deposited in an escrow account from which the lender then pays the taxes and insurance for you when due.

Some lenders will place the escrow amounts in an interest bearing account. The advantage of this is that it reduces (slightly) the amount you will have to contribute.

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