Escrow
An account your lender uses to collect and pay your property taxes and homeowners insurance on your behalf.
What does escrow mean?
With an escrow account, a portion of each mortgage payment is set aside to cover property taxes and insurance when they come due. It spreads these large bills across the year and ensures they’re paid on time. "Escrow" also refers to the neutral holding of funds during a home purchase.
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Related terms
Escrow — frequently asked
What does a mortgage escrow account pay for?
Your lender collects a slice of your property taxes and homeowners insurance with each monthly payment, holds it in escrow, and pays those bills when they come due. It spreads two big annual costs into smooth monthly amounts.
Why did my escrow payment go up?
Escrow rises when your property taxes or insurance premiums increase, since the lender must collect enough to cover the higher bills. After an annual escrow analysis you may also owe a shortage top-up if last year’s costs exceeded the estimate.