American Trust Escrow | What Is An Escrow Impound Account?
15211
post-template-default,single,single-post,postid-15211,single-format-standard,ajax_fade,page_not_loaded,,qode-theme-ver-13.8,qode-theme-bridge,disabled_footer_top,wpb-js-composer js-comp-ver-5.4.7,vc_responsive

What Is An Escrow Impound Account?

What Is An Escrow Impound Account?

An escrow impound account is a concept that you’ll want to become familiar with if you’re planning to buy a home. This account will be setup and managed by the mortgage lender and will be used to pay insurance and property taxes on the home buyer’s behalf.

One of the biggest misconceptions around Escrow Impound Accounts is that the escrow company actually is in charge of them, but this isn’t the case. Once escrow collects the initial deposit from the Escrow Impound Account and the transaction closes, the escrow company no longer has anything to do with the account.

Let’s dig a bit deeper into the topic to ensure you feel comfortable with this process…

How does an Escrow Impound Account Work?

Every month, the amount that equates to 1/12 of the total amount for the annual property taxes and insurance is collected from the homebuyer, along with the mortgage payment. When it is time to pay the yearly property taxes and insurance, the lender will administer a payment from the funds in the account that have accumulated on behalf of the homebuyer.

How does an Escrow Impound Account Get Setup?

The account is setup by the mortgage lender when the transaction is in escrow. The escrow company is responsible for the collection of the Escrow Impound Deposit. This is usually a deposit that accounts for two-six months of property taxes and insurance. Because property taxes and property insurance fees can fluctuate, this deposit amount ensures that the account has sufficient funds to be able to make the needed payments in their entirety.

There are some common questions about Escrow Impound Accounts that we hear frequently, so we wanted to share with you some valuable information about these topics.

Do I have to have an Escrow Impound Account?

No. Buyers are not required to have an Escrow Impound Account and may choose to pay their property taxes themselves. Depending on the circumstances, there may be a minimal fee if you elect not to have an account. Do keep in mind that, depending on the lender and/or loan type, the buyer may be required to have an Escrow Impound Account.

Do you recommend that I have an Escrow Impound Account?

One benefit of having and Escrow Impound Account is that you don’t have to worry about not having money available to pay property taxes and home insurance bills. Since these bills are paid twice a year, some homebuyers have said that it is hard to set aside money for them. Basically, the Escrow Impound Account ensures the money is there, and the homebuyer doesn’t have to worry about it.

When do I have to decide if I want an Escrow Impound Account?

If the home loan type of lender doesn’t require an Escrow Impound Account, the homebuyer must make the decision immediately. There are some lenders that allow homebuyers to setup the account at a later date, but they may charge a fee.


We hope that this information provides you with a better understanding of what an Escrow Impound Account is and how it’s used. Of course, please don’t hesitate to contact us if you have any questions or need assistance with an escrow!