What is escrow?

Escrow is a trust account created by a neutral third party to hold money for the seller or buyer. When you put down a deposit on a house, for example, you should put that money into an escrow account. When the sale is complete, the money can be released from this account to the seller. You should also set up an escrow account for your taxes and insurance. Your monthly mortgage payment includes payment for 1/12 of your taxes and insurance. This money is kept in an escrow account. When the bill comes due, your mortgage company uses the escrow money to pay it.

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