(also referred to as reserves)are funds held by the servicing agent or lender to pay for future costs associated with the mortgage or the property. Examples of commonly held escrows include funds for property taxes, future repairs or tenant inducements.

Lenders often set up an account, called an escrow or impound account, to hold the tax and insurance portions of your monthly mortgage payment. At closing, the lender collects sufficient money to establish the necessary reserves in this account. The reserves plus the monthly deposits are then held until such time they are used by the lender to pay the tax and insurance bills.