Most mortgage company required you to keep a mortgage reserve in your escrow account.

But how is the amount determined. Is it a percentage of the mortgage, is it a %
Of the your monthly payment, or what??

I went through this several years ago. The formula is a bit complex, but it boils down to this. They take the expenses that they paid out the previous year and divide that by 12. Then then check to make sure that the balance will never go below 2 months payment. They then jack up the payment to ensure that the 2 month minimum is maintained.

One of the nice things about my current mortgage holder is that they let you manage the escrow myself. Because I can a) keep the money in an interest bearing account and b) don't have to maintain an artificial minimum I can keep my payments lower.

Please do not ask questions via PM and/or e-mail. They should only be used for correspondence of a personal nature.

You deposit the funds in an account that will be liquid yet give the highest interest rate.