Mortgage-side account used to collect and hold money for property taxes, homeowners insurance, and similar housing costs paid when due.
An escrow account in mortgage finance is an account used to collect part of the borrower’s monthly payment and hold it for expenses such as property taxes, homeowners insurance, and sometimes related housing charges. The lender or servicer then pays those bills when they come due.
Escrow changes the real monthly cost of homeownership. A borrower may think only about principal and interest, but the required payment often also includes taxes and insurance that move through escrow.
With a mortgage escrow arrangement, the servicer collects a monthly amount above the scheduled principal-and-interest payment. That money accumulates until tax bills, insurance premiums, or similar charges are due.
| Payment piece | What it covers |
| — | — |
| Principal | Repays part of the loan balance |
| Interest | Cost of borrowing |
| Escrow | Funds held for taxes, insurance, and related property charges |
The servicer reviews the account periodically. If taxes or insurance rise, the required monthly escrow amount can rise too.
A homeowner owes $2,400 per year in property taxes and $1,200 per year in homeowners insurance. The servicer may collect about $300 per month into escrow so those bills can be paid when due, rather than requiring two large lump-sum payments during the year.
Borrowers often focus on the loan payment itself, but escrow sits on top of that amount and can change separately as taxes and premiums change.
In mortgage usage, impound account is commonly just another label for a mortgage escrow account, especially in some lenders’ documentation and some regional usage.
Mortgage Servicer: The company that often manages the escrow account.
PITI: Common mortgage-payment shorthand that often includes the escrow-funded taxes and insurance components.
Mortgage Insurance: One of the charges that may be collected through escrow in some loan structures.
Property Tax: Major recurring housing cost commonly paid from escrow.