Mortgage Impound Account


What is impounding a loan?


Impounding goes by several names.

The simple answer is:

To have an impound account is to have a reserve account that your mortgage lender will use to pay your taxes and insurance when they are due.

Having “impounds” as they are called, also means that your taxes and insurance will be included in your mortgage payment. It also means that you will have to pay more in closing costs in order to initiate the impound account.

Although you pay more in closing costs, all the money you pay is set aside for taxes or insurance. Any excess, you will get back if your home sells or refinances. It’s a matter of personal preference, but most of my clients don’t want to have to worry about paying a large chunk once a year when they can just set it and forget it with an impound account.

Lenders also give a slightly better interest rate if you choose to impound. Impound accounts are also known as reserve accounts, and escrow accounts. There are many different ways people refer to it.

Answered over 9 years ago
Matthew Graham
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