Reviewed by Jeff Shin, NMLS #1041652. Updated .
Also called: impound account, escrow.
How escrow works
The CFPB describes it this way: a portion of your monthly payment goes into the account, and the servicer pays your property taxes and homeowners insurance from it. Because those bills change from year to year, the escrow part of your payment changes with them, even on a fixed-rate loan.
The yearly review, shortages, and refunds
Under Regulation X, the CFPB’s rule implementing the Real Estate Settlement Procedures Act (RESPA), your servicer analyzes the account each year and sends a statement showing what came in, what went out, and what it expects next year. If taxes or insurance rose, the analysis can show a shortage, and your payment goes up to cover it. If the analysis shows a surplus of $50 or more and you are current, the servicer must refund it within 30 days. See why a payment jumps after an escrow shortage.
Can you skip escrow?
Some loans let you waive escrow and pay taxes and insurance yourself. Whether you can depends on the loan program and the lender, and a waiver can change your price. Read escrow waiver checks. Separately, “escrow” also describes the neutral account that holds your earnest money and closing funds during a purchase.
Related terms
Related on BankPricer
Sources
Definitions on this page are summarized from the agencies that set the rules. Lenders can add stricter requirements. Checked October 7, 2026.
Not sure which of these applies to you?
That is usually the actual question. Send the situation rather than the product name — purchase or refinance, primary or investment, price range, and timeline — and you get the structures that fit, with what each one costs.