What is escrow?
In mortgage servicing, escrow usually refers to an account the lender or servicer uses to collect money for property taxes and homeowners insurance as part of the monthly payment. That money is then used to pay those bills when they come due.
Why lenders use escrow
Escrow helps make sure taxes and insurance are paid on time. Because those costs help protect the property and the lender’s interest in it, many lenders prefer or require escrow.
Why buyers should understand it
Escrow changes the real monthly payment. If a buyer only looks at principal and interest, the budget can look more comfortable than it actually is once taxes and insurance are collected monthly.
Planning takeaway
Escrow is not usually an extra fee in itself, but it changes cash flow and the monthly payment amount. That is why StonePathHome calculators focus on the fuller monthly picture instead of the teaser loan payment alone.