Your Mortgage and Escrow: What You Need to Know

When buying a home, you’ll likely encounter the term “escrow.” But what does escrow mean in terms of your mortgage? Simply put, an escrow account is created by the lender at the time of closing. The buyer’s monthly mortgage payments are deposited into this account, and the funds are used to pay the property taxes and insurance on the home. 

In short, an escrow account is an account that is used to hold money for future payments, such as property taxes or insurance premiums. This account is typically managed by the lender who extends the mortgage loan to the borrower.

When a borrower applies for a mortgage loan, they will typically be required to open an escrow account. The lender will then deposit money into this account each month, along with the borrower’s regular mortgage payment. When the property tax bill or insurance premium comes due, the lender will use the funds in the escrow account to pay these bills. This system protects the lender from the borrower defaulting on these important payments.

For most borrowers, having an escrow account is simply a convenience. It ensures that their property taxes and insurance are paid on time, without them having to remember to set aside money each month. However, some borrowers may prefer to handle these payments themselves. If this is the case, they can typically request that their lender waive the escrow requirement.

Your mortgage lender will typically manage your escrow account as long as you have a loan with them. Once the mortgage has been paid off, you are no longer obligated to make payments to the lender. However, you may still be required to pay bills associated with your home directly, or set up a separate escrow account that performs the same function. Either way, it is important to be prepared for this change so that you can budget accordingly. If you have any questions about how your particular mortgage arrangement will work once the loan is paid off, be sure to ask your lender for more information. 

Escrow is an important part of the home-buying process, and it’s crucial to understand how it works. By knowing what escrow is and what it’s used for, you can be better prepared when buying a home. 

Have any other questions about escrow? I’d love to help! Send me an e-mail at and let’s get started!


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