Escrow
Money held by a neutral third party until conditions are met. In mortgages, part of each payment goes into escrow so property taxes and insurance get paid on time.
By Findley's Finance · Last reviewed: September 2026
Why it matters
Mortgage escrow exists because lenders do not trust borrowers to save for a $6,000 tax bill — so they collect one-twelfth of it with every payment and pay it themselves. That is why your "mortgage payment" exceeds principal and interest: taxes and insurance ride along. In a home purchase, an escrow account also holds your earnest money safe until closing.