Escrow Calculator

An escrow account is managed by your lender. Each month, you pay a portion of your annual property tax and homeowners insurance into it. When those bills come due, the lender pays them from the escrow account. It ensures taxes and insurance are always paid.

Most lenders require escrow for conventional loans with less than 20% down payment. FHA and VA loans almost always require escrow. If you have 20%+ equity, you may be able to waive escrow, though some lenders charge a fee for this.

By law (RESPA), lenders can require you to maintain a cushion of up to 2 months of escrow payments as a buffer. This protects against unexpected increases in taxes or insurance. If your escrow is over-funded by more than the allowed cushion, the lender must refund the excess.

Lenders perform an annual escrow analysis to review actual costs vs. estimates. If they underestimated (taxes increased), your monthly payment goes up. If overestimated, you get a refund or credit. Expect your escrow payment to change slightly each year as costs change.

If you have significant equity (usually 20%+) and request to waive escrow, some lenders allow it. You would then be responsible for saving and paying property taxes directly. However, the discipline required is high — many homeowners prefer escrow to avoid a large tax bill surprise.