Glossary

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Impounds
Impounds are the part of a monthly mortgage payment that is kept separate and used to pay for annual costs such as insurance, property taxes and private mortgage insurance. Borrowers simply need to pay their normal monthly mortgage payment, and the lender is responsible for separating the impounds from the principal payment. By paying impounds, borrowers do not need to worry about saving throughout the year in order to pay for yearly expenses such as property taxes. Before signing the final paperwork on a new home purchase, borrowers should have been advised of the specific amount of their monthly payments that will be considered impounds. As a last resort, borrowers can inquire at the closing conference. The annual mortgage statement will summarize the impounds for the year. By incorporating impounds into the monthly mortgage payment, lenders are certain that these required expenses will be paid.