What's the point of an escrow account? Why can't I just pay taxes myself?

Why can't I just pay my own taxes and insurance?

You're wondering why lenders require an escrow account instead of letting you pay property taxes and homeowners insurance directly. Many home buyers ask about this requirement and whether they can handle these payments themselves.

Escrow accounts help lenders protect their investment in your home. When you have a mortgage, the lender holds a financial interest in the property until you pay off the loan. Property taxes and insurance keep that investment secure—unpaid taxes can lead to tax liens, and a lapse in insurance coverage leaves both you and the lender exposed if damage occurs. The escrow account ensures these payments happen on time.

Your monthly mortgage payment includes principal, interest, taxes, and insurance (often called PITI). The lender collects the tax and insurance portions, holds them in the escrow account, then pays the bills when they're due. This spreads large annual or semi-annual payments across 12 months instead of requiring you to budget for big lump sums.

Some loan programs let you skip escrow if you put down 20% or more, though many lenders still prefer the account. Others require escrow regardless of down payment size. Ask your lender about escrow requirements for your specific loan type and whether you have options to pay taxes and insurance yourself.