Impound

DEFINITION of 'Impound'

An account maintained by mortgage companies to collect amounts such as hazard insurance, property taxes, private mortgage insurance and other required payments from the mortgage holders; these payments are necessary to keep the home but are not technically part of the mortgage. Impound accounts are often required of borrowers who put down less than 20%, but are usually optional in other cases. The purpose of the impound account is to protect the lender. Because low down-payment borrowers are considered high risk, the impound account assures the lender that the borrower will not lose the home because of liens or loss, as the lender pays insurance, taxes, etc. from the impound account when they are due.

BREAKING DOWN 'Impound'

Though the impound account is designed to protect the lender, it can also help the mortgage holder. By paying for these big-ticket housing expenses gradually throughout the year, the borrower avoids the sticker shock of paying large bills once or twice a year, and is assured that the money to pay those bills will be there when they need it. However, if the mortgage company does not pay these bills when they are due, the borrower will be held responsible, so borrowers should keep an eye out to make sure their mortgage companies are fulfilling their end of the bargain.

RELATED TERMS
  1. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  2. Reverse Mortgage Financial Assessment

    A review of the borrower’s credit history, employment history, ...
  3. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  4. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  5. Home Mortgage

    A loan given by a bank, mortgage company or other financial institution ...
  6. First Mortgage

    A mortgage in a first lien position on the property that secures ...
Related Articles
  1. Credit & Loans

    Buying A Home: Get Properly Insured

    By Amy FontinelleWhen you are on the hook for something as expensive as a home, not to mention when it's your residence, you'll want to make sure you have reliable protection against anything ...
  2. Credit & Loans

    Mortgage Basics: Costs

    By Lisa SmithPeople generally think about a mortgage in terms of the monthly payment. While that payment represents the amount of money needed each month to cover the debt on the property, the ...
  3. Credit & Loans

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Credit & Loans

    Guidelines for FHA Reverse Mortgages

    FHA guidelines protect borrowers from major mistakes, prevent lenders from taking advantage of borrowers and encourage lenders to offer reverse mortgages.
  5. Products and Investments

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  6. Home & Auto

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
  7. Brokers

    What The New Mortgage Lending Rules Really Mean

    Every mortgage rule change has consequences for borrowers, lenders, the housing market and the broader economy.
  8. Credit & Loans

    Mortgage Broker vs. Direct Lenders: Which is Best?

    There are key differences between mortgage brokers and direct lenders. Here's how to choose which is best for you.
  9. Home & Auto

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  10. Home & Auto

    Mortgage Options for Underwater Homeowners

    Find out what options are available when your mortgage is greater than the value of your home.
RELATED FAQS
  1. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  2. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
  3. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
  4. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  5. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  6. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center