What does the term 'Tax Impound' refer to in real estate?

The term 'Tax Impound' refers specifically to a system where money is collected by a lender from a borrower in advance to cover annual property tax payments. This amount is included in the borrower’s monthly mortgage payment, allowing for convenient budgeting and ensuring that the lender has the necessary funds to pay the property taxes when they come due.

By using a tax impound account, both the lender and the borrower benefit: the lender mitigates the risk of property tax liens that could arise from unpaid taxes, while the borrower does not face the burden of having to pay a large lump sum once a year. This system promotes financial discipline and ensures that tax obligations are met in a timely manner.

The other options deal with different aspects of real estate and finance but do not accurately capture the essence of what a tax impound is or how it functions in the context of mortgage payments and property ownership. For example, claims against a property for unpaid taxes suggest a legal action, while the public sale of property by a government authority pertains to tax foreclosure processes. Fees paid to third-party services are unrelated to tax payment mechanisms related to a mortgage.