Mortgage Escrow
mortgageAlso known as: escrow account, impound account, PITI escrow
Updated · Written and reviewed by Konstantin Iakovlev
Detailed explanation
Required for FHA, VA, USDA, and most conventional loans with LTV > 80%. Optional for conventional loans below 80% LTV (some lenders charge a fee to waive). Annual escrow analysis: lender reconciles actual taxes/insurance vs collected; shortage triggers monthly increase plus lump-sum makeup over 12 months; surplus over $50 returned to you. Common pain point: a property reassessment or insurance hike can spike your mortgage payment by hundreds even though P&I is fixed. Some borrowers prefer paying tax/insurance themselves for cash-flow control and to earn interest on the float — only available if LTV ≤ 80% on a conventional loan.
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Related mortgage terms
PITI (Principal, Interest, Taxes, Insurance)
PITI is the four components of a typical monthly mortgage payment: Principal (loan paydown), Interest (lender fee), Taxe...
Private Mortgage Insurance (PMI)
PMI is insurance protecting the lender if you default on a conventional mortgage with less than 20% down. PMI premiums a...
Debt-to-Income Ratio (DTI)
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Amortization
Amortization is the gradual paying down of loan principal over time through scheduled monthly payments. Each payment inc...
Home Equity Line of Credit (HELOC)
A HELOC is a revolving credit line secured by your home equity. Like a credit card, you borrow against an approved limit...
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