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If a person or institution, usually a bank, holds money for you and then delivers it to a third party in your behalf, the money they hold for you is said to be in escrow.

For example, principal and interest on Juanita’s mortgage is $1600. Every month she pays the bank $2300. The bank keeps the extra money then at the end of the year the bank pays Juanita’s property tax and homeowner’s insurance for her. The extra $700 per month that Juanita pays is said to be in escrow until the bank actually pays her tax and insurance.

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