Definition
An account your mortgage servicer uses to collect part of each payment and pay your property taxes and homeowners insurance.
What it means
Many lenders require an escrow account, also called an impound account. Each month, part of your mortgage payment goes into it, and the servicer pays your property tax and insurance bills when they are due. Federal rules under RESPA and the CFPB's Regulation X limit the extra cushion a servicer may hold to one-sixth of the year's escrow payments, or about two months, and require a yearly escrow analysis. If taxes or insurance go up, your monthly payment rises; if the account has a surplus of $50 or more, the servicer generally must refund it. A shortage may be spread over the next 12 months. In a home purchase, escrow can also mean a neutral third party holding money or documents until closing.
Example
If property taxes are $4,800 a year and insurance is $1,800, the escrow part of the payment is about $550 a month. If insurance rises to $2,400, escrow rises by about $50 a month after the next analysis.
Illustrative numbers only. Your situation will differ.