What is another name for an Impound Account?

An Impound Account is commonly referred to as an Escrow Account. This type of account is used by lenders to collect and hold funds from borrowers for the payment of property taxes and homeowners insurance. When a borrower makes their mortgage payment, a portion of that payment is deposited into the Impound Account. Once the property taxes and insurance premiums are due, the lender uses the funds in this account to pay those bills on behalf of the borrower.

The term "escrow" signifies a neutral third-party holding funds or documents until conditions of a transaction are met. In the context of an Impound Account, it operates under a similar principle, where the lender protects both the borrower and itself by ensuring that these necessary payments are made on time.

In contrast, a savings account is typically used for personal savings and not specifically for managing property-related expenses. A security deposit is primarily associated with rental agreements, serving as a guarantee for the landlord against potential damages or unpaid rent. The term contingency fund usually refers to savings set aside for unforeseen expenses rather than for handling regular recurring payments such as taxes and insurance. Understanding these distinctions emphasizes the specific purpose and functionality of an Impound Account in real estate transactions.