What is the term for an account where funds are held to pay property taxes and insurance on behalf of the borrower?

The correct term for an account where funds are held to pay property taxes and insurance on behalf of the borrower is the escrow account. This type of account is specifically used to set aside money for future expenses that the borrower is required to pay, such as property taxes and homeowners insurance. By depositing a portion of the mortgage payment into the escrow account each month, lenders can ensure that these necessary payments are made on time, thus protecting both the borrower's property and the lender's investment.

Fundamentally, an escrow account serves as a financial management tool that helps borrowers avoid the risk of falling behind on tax and insurance payments, which could lead to penalties or even foreclosure. It provides a structured approach that aids in budgeting for these expenses throughout the year.

In contrast, a loan account refers to the account where the mortgage balance is recorded and managed, while an interest account generally pertains to accounts that earn interest rather than manage payments for taxes and insurance. A trust account is often used for holding funds in trust for various purposes, but is not specifically designated for managing property tax and insurance payments.