08/19/2026
What Is An Impound Account?
An impound account (also called an escrow account) is a separate account your lender sets up to pay your property taxes and homeowner’s insurance on your behalf.
Each month, along with your mortgage payment, you’ll pay an estimated monthly amount for taxes and insurance. The lender holds these funds in your impound account and then uses them to pay your tax and insurance bills when they come due.
For many homeowners, this is helpful because:
- You don’t have to save up large lump sums for taxes and insurance.
- You avoid missing due dates or incurring late fees.
- Your housing costs are more predictable month to month.
To start an impound account, the lender needs enough money in it to cover upcoming bills. That’s why they typically collect several months (often around six months) of taxes and insurance upfront at closing. This initial “reserve” helps ensure there are always enough funds in the account to pay the next tax and insurance bills on time.
If you choose not to have an impound account, you’ll make your property tax and insurance payments directly to the tax authority and insurance company when they are due. This gives you more control, but it also requires more discipline and planning to set aside those funds on your own.
One important note when buying a new home:
Your initial property tax estimates are often based on the seller’s (previous owner’s) assessed value. After you purchase, the county can reassess the property based on the new ownership and applicable tax rules. If your taxes increase after a reassessment, your impound payment may need to be adjusted to account for the higher tax bill.
That’s why it’s important to understand that your initial impound estimate may not always reflect your future property tax obligation.
Overall, an impound account can significantly reduce the stress of budgeting and saving for large, infrequent tax and insurance payments, as long as you understand the upfront reserve requirement and that your payment can change if your taxes or insurance costs increase.
