What is Escrow?

Many mortgage lenders hold money in escrow to pay property taxes and insurance. Each month, you pay a portion of the estimated annual costs along with your principal and interest. This way you will have consistent monthly mortgage payments and not have to pay these bills all at one time. At the end of the year, the lender adjusts your monthly escrow amount based on the actual tax and insurance bills. This means your monthly mortgage payment can change slightly from year to year.