What is Escrow / Impound Account?
An escrow or impound account is one your lender uses to collect and pay your property taxes and homeowners insurance for you. A portion of those annual costs is added to your monthly payment, and the lender pays the bills when due, spreading big yearly expenses into manageable amounts. (Note: “escrow” also refers to the neutral third party that handles closing.)
Example: A homeowner’s taxes and insurance total $9,000 a year. The lender collects $750 each month into an impound account and pays the bills automatically.