What Is Escrow Account?
A mortgage escrow (or impound) account is a fund a servicer maintains on a borrower's behalf, collecting a portion of property taxes and homeowners insurance with each monthly payment and paying those bills when due.
Why It Matters
It spreads large annual tax and insurance bills into smaller monthly amounts and protects the lender's collateral by ensuring taxes and insurance stay current — most lenders require it below 20% equity.