What is escrow on a mortgage?
Escrow is a holding account managed by your mortgage servicer. Each monthly payment includes one-twelfth of your estimated annual property taxes and homeowners insurance; the servicer banks it and pays those bills when due. Lenders like it because unpaid taxes can create liens senior to their mortgage, and most loans with smaller down payments require it.
This is also the answer to the perennial homeowner mystery, why did my fixed-rate payment go up: the loan did not change, the taxes or insurance premium did, and the annual escrow analysis trues up the account, sometimes adding a shortage from last year on top of the higher forward estimate. Read the analysis letter rather than assuming an error; if insurance drove it, shop the policy. Some lenders let well-qualified borrowers waive escrow and pay taxes directly, a fine choice for the organized and a famous disaster for everyone else.
Escrow is a side account your lender runs inside your mortgage payment, collecting a twelfth of your property taxes and insurance monthly, then paying those bills for you. The annual adjustment is why your payment changes.
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https://frequentlyaskedquestions.us/q/what-is-escrow/Everybody Asks. (2026, July 28). What is escrow on a mortgage? https://frequentlyaskedquestions.us/q/what-is-escrow/“What is escrow on a mortgage?” Everybody Asks, 28 July 2026, https://frequentlyaskedquestions.us/q/what-is-escrow/.“What is escrow on a mortgage?” Everybody Asks. Last modified July 28, 2026. https://frequentlyaskedquestions.us/q/what-is-escrow/.This page summarizes the primary sources listed above. For academic or encyclopedic work, cite those primary sources directly wherever possible.