Property or money held by a third party, usually a bank. Both the title company and the mortgage lender maintain different escrow accounts—sometimes called "impound" accounts. The title company's escrow account collects all closing funds and disburses them to satisfy liens and appropriate parties. With many purchases, the title company will often hold an impound account containing tax payments from and by the seller—which will be applied as soon as the next real estate tax bill arrives.
For residential mortgage purposes, the escrow is established and maintained by the lender to pay for future property taxes and insurance premiums. When it comes time to pay the property taxes and insurance premium, the lender will use the funds in the escrow. For more information, see the "Monthly Payments" and "Escrow Account" articles in the "Homebuyer Guide" section.
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