The purpose of this disclosure is to explain how we make money without charging you for our content.
Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.
Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.
Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.
Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.
To find out more about our editorial process and how we make money, click here.
An escrow account is essentially a holding tank. During a real estate transaction, the escrow officer—usually a lawyer or title company representative—holds all the important documents and deposits while the buyer and seller work out the details.
The escrow officer makes sure the closing goes smoothly and everyone gets paid what they’re owed (including, of course, the escrow officer himself, who typically gets a fee of 1% to 2% of the cost of the home). After the closing, the escrow agent records the deed and title transfer that make the home officially yours.
Calculator: How do closing costs impact the interest rate?
Most transactions involve a second type of escrow account, between you and your lender. Many mortgage lenders hold money in escrow to pay property taxes and insurance. Each month, you pay a portion of the estimated annual costs along with your principal and interest.
At the end of the year, the lender adjusts your monthly escrow amount based on the actual tax and insurance bills. If you were short, you’ll generally be allowed to spread the difference out over the coming year. If you paid in too much, the lender will refund your money.