Mortgage Glossary
Escrow
A neutral account that holds funds for closing or for property taxes and insurance.
Escrow has two meanings in mortgages. During a purchase, an escrow or settlement agent holds funds and documents until the transaction closes.
After closing, an escrow (or impound) account collects part of your taxes and insurance with each monthly payment, then pays those bills when due.
Escrow accounts help spread large annual bills into manageable monthly amounts and ensure they're paid on time.
Frequently asked
Is an escrow account required?
It's required on many low-down-payment loans, and optional on some loans with larger down payments.
Why did my escrow payment change?
Escrow amounts adjust when your property taxes or insurance premiums change year to year.