What Is An Impound Account In Real Estate?

In real estate, an impound account is set up by the lender.  It is established to pay for the property tax and insurance bills in the future. Though the mortgage payments are a tad higher for the buyer due to the provision of the impound account, this system augurs well for the lender because he is able to pay the insurance payment and tax payment in time. If there is some sort of a lapse in these payments, the value of the mortgage property is reduced. In an impound account, the money is actually set aside in a trust account for these payments which are received every month.  An impound account does not let this happen. One can also call an impound account, an 'escrow' account.