Home Buying

What Is an Escrow Account?

An escrow account, in the mortgage context, is an account managed by the loan servicer that collects part of each monthly payment to pay the homeowner's property taxes and insurance when they come due. The term also describes a neutral third party holding money during a home purchase until the sale closes.

How Mortgage Escrow Works

The servicer estimates yearly property tax and insurance bills, divides them by 12, and adds that amount to the monthly mortgage payment. The account is reviewed periodically, and payments can rise or fall if taxes or premiums change.

Escrow During a Purchase

When a home is bought, an escrow or settlement agent may hold the buyer's deposit and documents until all conditions of the sale are met.

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🔗 Related Terms

Mortgage Property Tax Closing Costs

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.