A mortgage escrow account is an account through which a mortgage servicer collects money for certain property-related expenses as part of the monthly payment.
Common Escrowed Expenses
- Property taxes
- Homeowners insurance
- Other required property-related charges when applicable
How It Works
The servicer generally collects a portion of expected annual expenses each month and pays the applicable bills when due.
Why a Fixed-Rate Payment Can Still Change
The note rate may be fixed while property taxes, insurance premiums, or escrow requirements change.
Escrow Analysis
Servicers periodically review the escrow account. The analysis may produce a shortage, surplus, or change in the required monthly escrow payment.
Homebuyer takeaway: Separate principal and interest from the total monthly housing obligation when budgeting.
Sources
CFPB: Escrow Accounts