An escrow account is a special account your mortgage servicer uses to pay property taxes and insurance. Here's everything you need to know.
What is an Escrow Account?
Your lender collects a portion of your monthly payment and holds it in an escrow account, then pays your property taxes and insurance when due.
What Does Escrow Cover?
- Property taxes
- Homeowners insurance
- Flood insurance (if required)
- Mortgage insurance (if applicable)
Pros and Cons
Pros: Automatic payments, no large lump sums, peace of mind
Cons: Less control, possible shortage/overage, higher monthly payment
Escrow Analysis
Once a year, your servicer reviews your account and adjusts your payment if needed.