Escrow

Banking & Credit

Escrow has two meanings in real estate. During home purchase, it's a third-party account that holds the buyer's earnest money deposit until closing. After purchase, it's an account your mortgage servicer uses to collect monthly portions of your property taxes and homeowner's insurance, then pay those bills annually on your behalf. Escrow protects everyone: the buyer doesn't lose deposit money before closing; the lender doesn't get surprised by an unpaid tax lien. Some borrowers waive escrow (typically with 20%+ down and strong credit) to keep the cash flow flexibility, but most carry it for the budgeting convenience.