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What is escrow?

Escrow has multiple meanings, but when we refer to escrowing mortgage payments, we refer to this:

 

We the lender will be responsible for holding your property tax and insurance money and will make the payments of these bills for you.  When you make your monthly mortgage payment, not only will you pay your mortgage, but also 1/12 of your tax bill and 1/12 of your insurance bill.  You’ll also owe some money up front.  So when you purchase, you’ll need to fund your escrow account with a few months of each.  How much depends on in which jurisdiction you purchase.