Escrow account
What is escrow account?
An escrow account is held by your servicer to collect property taxes and insurance premiums monthly and pay those bills when they come due.
What it means in practice
Your escrow portion is an estimate. When taxes or insurance rise, the servicer performs an escrow analysis and your total payment changes even on a fixed-rate mortgage.
A shortage after an analysis can be repaid over twelve months or in a lump sum, which is why a fixed-rate payment can still jump unexpectedly.
Refinancing sets up a new escrow account and refunds the old one, so you may need cash at closing before that refund arrives.