Impound Definition
The term "impound" may mean to seize and retain something or to set something aside, according to the American Heritage Dictionary. Practical uses of the word commonly refer to either mortgages or vehicles, though impound means two different things in these cases.
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Identification
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For a mortgage, impound means that your mortgage payment includes monies for your property taxes and homeowner's insurances. With vehicles, an impound is a place where vehicles that were towed by the police are kept.
Function
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Mortgage impound is used so that you can save up the payments for your insurance and taxes in an account kept by your lender so you do not have access to it. Vehicle impound is used to prevent you from driving your vehicle because you have broken a law related to driving.
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Time Frame
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Mortgage impound is continuous, but some lenders will allow you to discontinue sending your tax and homeowner's payments to them provided that you pay the required bills on your own. The length of vehicle impound varies depending on state laws, but typically lasts around 30 days or until you have paid fines or tickets in some cases.
Types of Reasons for Vehicle Impound
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Your vehicle may be impounded if you have unpaid parking or speeding tickets, are involved in a motor vehicle accident and do not have auto insurance, or if you are arrested for driving while impaired.
Benefits of Mortgage Impound
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Sometimes called "escrow," mortgage impound means you do not have to keep track of your mortgage or homeowner's insurance bills or due dates and are able to gradually put money aside for these expenses rather than having to come up with the money all at once. Mortgage lenders prefer impound because it guarantees that the property you have pledged will not be seized if you have not paid taxes and is protected in the case of a natural disaster or fire.
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