Understanding Escrow Accounts
Escrow is why your mortgage payment covers more than principal and interest. Understanding it explains why payments sometimes change.
What escrow collects
Many lenders collect a portion of your annual property taxes and homeowners insurance each month, hold it in an escrow account, and pay those bills on your behalf when they come due.
Why payments change
If your property taxes or insurance premiums rise, your escrow portion rises too, which changes your total monthly payment even when your interest rate is fixed.
Key takeaways
- Escrow bundles taxes and insurance into your payment.
- The lender pays those bills on your behalf.
- A fixed rate can still have a changing total payment.
Test your knowledge
3 quick questions. Score 70% or higher to complete this lesson.
1. An escrow account commonly collects money for:
2. Why might your total payment change even with a fixed rate?
3. Who pays the tax and insurance bills from an escrow account?
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Written by
Joel Olson
Founder, Blueprint Home Loans LLC · Florida Mortgage Broker · Individual NMLS #1410944
Joel founded Blueprint Home Loans on an education-first philosophy: help buyers understand their options and make confident, informed decisions. With more than 20 years in financial services, his goal isn't to sell a mortgage — it's to build a plan around your life.
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This lesson is educational and is not a commitment to lend, financial advice, or a guarantee of approval. Program guidelines, rates, and eligibility vary by lender, location, and individual circumstances and change over time. Speak with a licensed mortgage professional for guidance specific to your situation.