Escrow is a legal arrangement in which an asset (such as money) is deposited into safekeeping (a bank account) under the trust of a neutral third party (escrow agent usually a title company or real estate attorney) pending satisfaction of contractual contingency or condition. Once the condition has been met, the escrow agent will deliver the asset to the party prescribed by the contract.

In mortgages, the mortgage company establishes an escrow account to pay property taxes and insurance during the term of the mortgage. Your mortgage will change periodically due to a shortage of escrow.

The first couple of years that you own your property you may receive a check from your mortgage company for the escrow amount not used. The following years you may receive a letter from your mortgage company stating you can pay ex amount of dollars in full or you can pay an extra $20 to $50 a month extra for that year due to a shortage of escrow funds. Your escrow funds have a shortage due to an increase in property taxes and insurance every year. Remember that since your property taxes and insurance increase usually every year take time to ask your insurance company what your insurance costs and you may want to find an insurance company that has a lower rate, don't be afraid to shop around for a new insurance company if you need to.