The account
The CFPB describes an escrow account, called an impound account in some places, as an account set up by your mortgage lender to pay certain property-related expenses. The money comes from a portion of your monthly payment.
Calculate your monthly payment →
The monthly amount
Under Regulation X, the servicer may charge a monthly sum equal to one-twelfth of the total annual escrow payments it reasonably expects to make.
The cushion
The servicer may also keep a cushion. It must be no greater than one-sixth of the estimated total annual disbursements from the account.
The yearly review
At the end of each escrow account computation year, the servicer analyzes the account to set the monthly escrow payment for the next year, and sends you an annual escrow account statement.
Why the total moves
Property taxes and insurance premiums can change from year to year, the CFPB notes, and the escrow payment changes with them. The calculator shows the escrow part separately so you can see how much of the payment is exposed to that.
Loans without escrow
Then you pay the tax and insurance bills yourself. The calculator still includes them in the monthly total, because they are part of what owning the home costs per month.