Escrow Account is a separate account held by the lender or servicer to collect and manage funds for property taxes, insurance, and other expenses.
An escrow account, also known as an impound account, is a separate account that is set up and held by a lender or loan servicer to collect and manage funds for various expenses related to a property. The purpose of an escrow account is to ensure that these expenses are paid on time and in full.
Typically, when you have a mortgage loan, the lender may require you to establish an escrow account as part of the loan agreement. A portion of your monthly mortgage payment is deposited into the escrow account, and the funds are then used to pay for property taxes, homeowners insurance, mortgage insurance, and other expenses as outlined in the loan agreement.
By collecting funds in advance, the lender or loan servicer can ensure that these expenses are paid when they become due, avoiding any potential delinquencies or liens on the property. It provides a convenient way to manage and distribute these expenses throughout the year, rather than requiring the borrower to handle them separately.
The exact requirements and regulations regarding escrow accounts can vary depending on the jurisdiction and the specific loan terms. It’s important to review your loan agreement and consult with your lender or loan servicer for accurate information about how the escrow account is managed in your particular situation.