Who benefits from an impound account set up for a loan?

An impound account, also known as an escrow account, is primarily established by lenders to ensure that funds are available to cover specific expenses associated with the property. These expenses typically include property taxes and homeowners insurance premiums. By setting up this account, the lender can collect a portion of these costs each month as part of the borrower's mortgage payment, thereby providing a more manageable approach for the borrower to handle these larger, periodic expenses.

The lender benefits from this arrangement because it reduces the risk of tax liens on the property and ensures that the insurance is maintained, protecting their investment. By overseeing these payments directly, the lender can help prevent potential default situations associated with unpaid property taxes or lapses in insurance coverage, thus safeguarding their collateral.

While borrowers may appreciate the convenience of having these expenses included in their monthly payments, the primary benefit of the impound account is aligned with the lender's interests in ensuring that the necessary responsibilities are met and that the property remains secure.