Escrow account (impounds)
Also called: impound account, escrow impounds, escrow analysis
An account your servicer uses to collect and pay your property taxes and homeowners insurance alongside the mortgage payment.
Rather than paying taxes and insurance in lump sums, you pay one twelfth each month with the mortgage. The servicer holds the money and pays the bills when they come due, then re-analyzes the account periodically and adjusts the monthly figure.
Because taxes and insurance premiums change, the escrow portion of your payment changes too, which is why a payment can rise even on a fixed-rate loan. A shortage after the first year is common when the initial estimate was based on pre-sale figures.
Related terms
- PITIPrincipal, Interest, Taxes and Insurance, the four parts of a typical monthly mortgage payment.
- PrepaidsMoney collected at closing to fund your own future taxes and insurance, plus interest from closing to month end.
- Property taxAn annual tax assessed by local government on real property, usually collected monthly through escrow.
- Homeowners insuranceProperty and liability coverage a lender requires, typically paid a year in advance at closing then escrowed.
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