How an Impound Escrow Account Works
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An escrow account is like a piggybank for your property taxes and homeowner’s insurance. Here's how it works:
Why It's Required
If your down payment is less than 10%, lenders require an escrow account to make sure your property taxes and insurance are paid on time.
How It Works
The lender splits your yearly property taxes and homeowner’s insurance into 12 monthly payments.
These amounts are added to your monthly mortgage payment, which is called an escrow payment.
Each month, when you pay your mortgage, the escrow part goes into your escrow account.
What It Does
The lender uses the money in the escrow account to pay your property taxes to the county and your homeowner’s insurance to the insurance company when they are due.
This ensures your taxes and insurance are always paid on time, protecting both you and the lender.
Fluctuating Payments
Your property taxes may change each year based on county assessments, which means your monthly escrow payment might also change.
At Closing
When you buy a home, you need to put some money into the escrow account at closing to get it started.
This amount depends on the lender’s requirements, but sometimes lender credits can help cover these initial costs.
In summary, an escrow account takes care of your property taxes and insurance for you, so it's one less thing to worry about.
An impound escrow account holds funds for property taxes and insurance, collected monthly with your mortgage payment. Equity Capital explains its benefits and lender requirements.
Yes, many lenders require impound escrow accounts on loans with less than 20% down. It ensures taxes and insurance are paid on time.
Lenders estimate annual taxes and insurance, divide by 12, and add to your mortgage. Equity Capital provides a full escrow breakdown during pre-approval.
In some cases, yes—typically after reaching 20% equity. Equity Capital will advise you on removing impound escrow account requirements.
Yes. Most California lenders use impound escrow accounts to simplify budgeting and ensure property tax and insurance compliance.
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