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Escrow
An account your loan servicer holds to pay your property tax and home insurance for you. Each monthly payment adds to it.
Most US borrowers do not pay property tax and home insurance themselves. Each month they pay a twelfth of the year’s bills into escrow, together with principal and interest, and the servicer pays the bills when they fall due. That is why a US monthly payment is usually larger than principal and interest alone.
At closing you also make an initial deposit into the escrow account. In California, escrow also names the closing process itself, where a neutral party holds the money and papers until the sale completes.
Related terms
- Private mortgage insurance (PMI)
Insurance that protects the lender, not you, when your down payment is small. You pay it monthly, and US federal law sets when it ends.
- Loan-to-value (LTV) / down payment
Loan-to-value is the loan amount divided by the value of the home. The down payment is the rest of the price, paid with your own money.
- Loan term
The time you have to repay the loan in full, counted in months or years.