Escrow Account
Also known as Impound Account
An ongoing account your lender uses to collect and pay your property taxes and insurance for you.
In plain English
After closing, many lenders set up an escrow (or impound) account, collecting a portion of your annual property taxes and insurance premiums with each monthly mortgage payment, then paying those bills on your behalf when due.
This is why your monthly payment can change slightly year to year even with a fixed rate. It adjusts based on updated tax and insurance costs.
Worked example
If your property tax bill rises by $600 a year, your escrow portion of the monthly payment rises by about $50, even though your principal-and-interest payment stays exactly the same.
Ask your lender or servicer for a copy of your most recent escrow analysis, and what triggers a shortage (a one-time catch-up charge) versus just a higher ongoing monthly payment.
Homeowners sometimes think a higher mortgage bill means their interest rate changed. On a fixed-rate loan it usually just means the escrow portion was recalculated after taxes or insurance went up.
Where you'll run into it
Guides and tools on TheBuyingPath that cover escrow account in context.
Related terms
Sources
Not sure where this fits in your process?
Answer a few questions and get a personalized homebuying roadmap: where you are now, what comes next, and which terms like this one matter at each step.
Start your roadmap