What is Escrow?

Escrow is defined as a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or "closing." Escrow may also refer to an account held by the lender into which the home buyer pays money for tax or insurance payments; it is considered a legal and binding agreement.

Escrow is usually associated with real estate transactions. Escrow agents are required to go through extensive professional training and must meet accreditation requirements.

The escrow process is covered by significant ruling and protection through the use of licensing and or bonding. There are many escrow services available to you on the internet and you can find the right escrow agent right online and use the services via the web.

A mortgage escrow account is a special account set up where money is held to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items. They insure that these items are paid on time and that there is always enough money to pay them so you avoid the risk of lapsed insurance coverage or delinquent taxes.

With escrow accounts, unexpected increases are taken care of the mortgage company is responsible to allow for potential increases in tax or insurance premiums. They cover shortages when payments increase. Mortgages have lower rates and down payments because of escrows. Escrows protect the interest of investors of home mortgage loans by making them more attractive and secure as investments. Escrow accounts benefit local governments by providing a well-organized and less costly was to collect taxes.

Contributing National Payday Staff Writer

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