Quick answer
An escrow account (also called an impound account) is an account your mortgage servicer sets up to pay certain property-related bills — mainly property tax and homeowners insurance, and sometimes mortgage insurance — from a portion of each monthly payment.
Key facts
2months
Maximum cushion (one-sixth of a year’s escrow bills)
CFPB, Regulation X 1024.17 · Oct 28, 2026
Example: the monthly deposit
On a $361,000 home taxed at the US effective rate of 0.89%, the yearly tax bill is about $3,213; add an average insurance premium of $1,522/yr and the account must pay $4,735 a year. That adds $395 to each monthly payment. Federal rules let the servicer keep a cushion of no more than one-sixth of the yearly total — 2 months of deposits, or $789 here.
The yearly escrow analysis
Once a year the servicer compares what it collected with what it paid and resets your deposit. If there’s a surplus of $50 or more and you’re current, it must refund it within 30 days. If there’s a shortage of a month’s deposit or more, the servicer can’t demand it all at once; it may spread repayment over at least 12 months. That’s why your payment can change even on a fixed-rate mortgage.
Lenders often require escrow, and some loans require it by law. At closing you fund it with an initial deposit, part of your prepaid items. Don’t confuse it with the escrow that holds a buyer’s earnest money before closing. See escrow accounts explained, and use the mortgage payment calculator to see escrow inside your full payment.
Sources
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- Freddie Mac Research — Average annual homeowners insurance premium (Freddie Mac borrowers) (2023 data)
- CFPB, Regulation X 1024.17 — Most an escrow account may hold as a cushion (one-sixth of annual escrow payments); Escrow surplus at or above this amount must be refunded to a current borrower; Escrow surplus refund due within this long after the annual escrow analysis (Oct 28, 2026)
- CFPB: What is an escrow or impound account?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.