What Is an Impound Account
An impound account is a lender-controlled escrow account where your mortgage servicer collects a portion of your monthly payment to cover property taxes and insurance premiums on your behalf. The servicer holds these funds and pays your tax bills and insurance renewals directly to the county assessor and insurance company when they're due.
For property owners contesting high assessments, impound accounts matter because they tie your monthly mortgage payment directly to the assessed value of your property. When your assessment increases, your property tax bill increases, which means your impound payment typically increases as well. If you're in a mortgage with an impound account, you don't have the flexibility to defer or negotiate tax payments the way an owner with a traditional tax bill might.
How Impound Accounts Affect Assessment Appeals
Your mortgage servicer calculates your impound payment based on the previous year's tax bill. When your county assesses your property using comparable sales data or the income approach method, and that assessment is higher than last year, your next tax bill increases. Your servicer will adjust your impound payment upward to reflect the new bill amount.
This creates a practical problem for property owners: you feel the impact immediately in your monthly mortgage payment. If you believe your assessment is too high, you need to file an appeal with your local board of review before that assessment ratio locks in for the tax year. Most jurisdictions require appeals to be filed within 30 to 45 days of the assessment notice, though this varies by state.
Understanding Impound in Context of Assessment Ratios
Counties use assessment ratios to determine what percentage of market value they assess. If your county uses a 35 percent assessment ratio, a property worth $500,000 is assessed at $175,000. Your impound payment reflects taxes calculated on that assessed value. If comparable sales in your neighborhood suggest your property is worth less than the assessor claims, you have grounds for an appeal. Lowering the assessed value by just 10 percent could reduce your annual tax bill by thousands of dollars, which directly lowers your monthly impound payment.
What to Gather Before Your Board of Review Hearing
- Your assessment notice showing the assessed value and assessment ratio used
- Comparable sales data from the past 6 to 12 months showing similar properties selling for less
- Recent appraisals or professional valuations you've obtained
- Documentation of property condition issues that affect value, such as foundation damage or roof replacement costs
- Your mortgage statement showing the current impound payment amount
- Tax bills from the current year and prior years showing the increase
Common Questions
- Can I stop my servicer from adjusting my impound payment while I appeal my assessment?
- No. Your servicer is required by mortgage agreements to collect funds based on the actual tax bill. However, if your appeal is successful and the assessment is reduced before the tax bill is finalized, the reduction will be reflected in the next impound adjustment. Some jurisdictions offer escrow adjustments or preliminary assessment reductions during the appeal process.
- What if the board of review denies my appeal but I still believe my property is overvalued?
- You typically have the right to appeal to your state's property tax court or tribunal, depending on your state's process. This usually must happen within 60 to 90 days of the board's decision. Your impound payments continue based on the assessed value unless you win an appeal.
- Does an impound account affect my ability to claim property tax exemptions?
- No. Tax exemptions are applied at the assessment level before your servicer calculates the impound amount. Homestead exemptions, agricultural exemptions, and veteran exemptions all reduce the assessed value or tax bill, which then flows through to your impound payment.