What is an escrow account in a mortgage?

An escrow account is a third-party account your lender manages to collect and pay property taxes and homeowner's insurance on your behalf. Each month, a portion of your mortgage payment goes into this escrow account. When tax and insurance bills come due, the lender pays them from the account. Escrow ensures these critical bills are never missed. Lenders typically require escrow accounts when your down payment is less than 20%. Some lenders allow you to waive escrow once sufficient equity is built, but may charge a fee for this privilege.