The ‘S’ crow is kind of a mascot here, because there is no such bird. You won’t hear the word “escrow” for years, and then you’ll hear it all the time if you’re buying a home. Here’s what the word means.
Some of the charges connected to a home:
- Real estate taxes
- Mortgage insurance
- Homeowner’s insurance
are applied annually. The escrow account is a ‘bucket’ where part of monthly mortgage payments accumulate to pay these costs.
Escrow account costs may — and usually do — change each year, because these charges change.
It’s useful to understand that the lender is responsible for making those payments on time, from the escrow account. If something’s late, make sure you are not fined or punished.