Also known as an impound or trust account, a mortgage escrow account is a way for borrowers to pay the costs associated with owning a home. A portion of your anticipated property tax bill and hazard insurance premium is added to your monthly mortgage payment so that when each becomes due, the servicer will have funds in your account to pay them. If flood insurance or private mortgage insurance (PMI) is required, these fees will be included in your monthly payment.
One of the most significant benefits of a mortgage escrow account is peace of mind. Rather than worrying about paying a big annual tax and insurance bill all at once, you’ll spread those costs into monthly installments. With an escrow account, you’ll also never be late on your property tax payments because your loan servicer will pay them for you on time.