Escrow Account
Direct definition
A lender-held account that collects a portion of your monthly payment to pay property taxes and insurance when due.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Each month you pay 1/12 of your annual taxes and insurance into escrow. The servicer pays those bills directly when they come due.
Why it matters
Escrow smooths large annual bills into predictable monthly payments and protects the lender's collateral.
Where you may see it
- Mortgage statement
- Escrow analysis statement
- Closing Disclosure
A real-world example
Property taxes of $6,000/year and insurance of $1,800/year add $650/month to your PITI payment.
Educational and illustrative only
A common misunderstanding
Money in an escrow account is not extra savings for you to withdraw — it's reserved specifically for upcoming tax and insurance bills.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026