Escrow account
An account your mortgage servicer uses to collect part of each payment and pay your property taxes and homeowners insurance for you.
Each month, you pay one twelfth of your yearly tax and insurance bills into escrow along with principal and interest. The servicer pays the bills when they come due.
Once a year the servicer reviews the account. If the bills went up, your payment rises. For most loans, a surplus of $50 or more must be refunded within 30 days if you are current.
Example
Property tax of $4,500 plus insurance of $2,400 is $6,900 a year, so escrow is $6,900 ÷ 12 = $575 a month.