Escrow
An escrow account is a dedicated account managed by your mortgage servicer that collects and holds funds for property taxes and homeowners insurance as part of your monthly mortgage payment.
Each month, a portion of your payment is deposited into escrow. When tax and insurance bills come due, the servicer pays them on your behalf. This ensures these critical obligations are always funded and paid on time. Learn more in our guide to how escrow accounts work.
Escrow is not an extra charge — it is a budgeting mechanism. The money collected belongs to you and is used exclusively for the taxes and insurance tied to your property.
Why This Matters: Escrow protects you from large lump-sum bills and ensures your property taxes and insurance never lapse. Understanding how your escrow account works helps you anticipate payment changes and avoid shortages.
Why Escrow Payments Can Change: Your escrow payment may change from year to year based on property tax adjustments or homeowners insurance premiums. Lenders perform an annual escrow analysis to make sure enough funds are collected to pay these bills when they come due.
Common question
What does my escrow payment cover?
Your escrow payment covers property taxes and homeowners insurance. The servicer collects a portion each month and pays the bills when they come due.
Can my escrow payment change?
Yes. When taxes or insurance go up, your servicer adjusts your monthly escrow so the account can cover the higher bills. You will receive an escrow analysis notice when this happens.
Related Mortgage Terms
Confused about what goes into your escrow account? We will explain exactly how it works and what it covers.
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