Escrow Account

The account in which a mortgage servicer holds the borrower's escrow payments prior to paying property expenses.

An escrow account is money that is deposited with a third party -- outside the buyer and the seller -- to be used to pay various fees. A borrower typically provides funds that will pay taxes, mortgage insurance, lease payments, hazard insurance premiums, and other payments when they are due.

An escrow payment by the holder of a mortgage is also known as "impounds" or "reserves" in some states.

When escrow funds are used to pay taxes, hazard insurance, and other fees, it is called an escrow disbursement. Periodically, an escrow analysis will be performed to determine if current monthly deposits provide sufficient funds to pay bills when they are due.

 

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