What is the common name for the special account used to cover property taxes and insurance in addition to mortgage payments?

The term "impound account" refers to a special account that lenders establish to cover recurring expenses related to property ownership, specifically property taxes and homeowners insurance. When a borrower makes their monthly mortgage payment, a portion of that payment is deposited into the impound account. This system allows for the timely payment of these expenses when they come due, helping homeowners avoid potential penalties due to late tax payments or lapses in insurance coverage.

This arrangement is often built into the mortgage structure, ensuring that such costs are factored into the overall monthly payment instead of requiring the homeowner to make separate payments for taxes and insurance. By managing these costs in this manner, lenders also protect their investment in the property, as unpaid taxes or insurance could jeopardize the security backing the loan.

Other options, while related to finance and real estate, do not accurately describe the specific function of covering property taxes and insurance along with mortgage payments. An escrow account is typically used in real estate transactions to hold funds until certain conditions are met, while a trust account is usually associated with holding clients' funds by agents or brokers. A maintenance account pertains to funds set aside for property upkeep and is not linked to the obligations of taxes and insurance.