New Jersey Real Estate License Exam Practice Question
A lender may add 1/12th of the estimated cost of the annual property taxes and hazard insurance on the mortgaged property to the monthly loan payment for deposit in:
Correct Answer: C
Rationale: Lenders often require borrowers to contribute to an impound, escrow, or reserve account to ensure property taxes and hazard insurance are paid on time. This method allows for the monthly collection of 1/12th of these annual costs, providing a secure way to manage these expenses.
Option A, a PMI account, is specifically for private mortgage insurance and does not cover taxes or insurance. Option B, a margin account, relates to investments and is not applicable in this context. Option D, an adjustment account, is not a standard term used in mortgage financing and does not pertain to the management of property-related expenses.
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