Taxes & Insurance
What is an escrow account on a mortgage?
Updated Jul 1, 2026
The short answer
A mortgage escrow (or impound) account is a holding account your lender uses to collect and pay your property taxes and homeowners insurance on your behalf. A portion of each monthly payment goes into escrow, and the servicer pays the bills when they come due. Because tax and insurance amounts change, your monthly payment can rise or fall after an annual escrow analysis.
Key points
- Bundles taxes and insurance into your monthly payment.
- The servicer pays the bills from the account.
- Annual escrow analysis can change your payment.
- Shortages and surpluses are trued up yearly.
Why your payment changes
Your principal and interest are usually fixed, but taxes and insurance are not. When those rise, your escrow portion rises, so the total monthly payment increases even on a fixed-rate loan.
Put this to work
Sources
Every claim above traces to a public government source.
- ViewT1What is an escrow or impound account?
Consumer Financial Protection Bureau · Government / primary · 2024