How to use the escrow calculator
- Enter your yearly property tax and homeowners insurance. Add other items your lender collects, such as mortgage insurance.
- Enter the cushion in months, using the figure from your servicer. The default is an example.
- Optionally enter an expected change in tax or insurance to see how the payment could move after a reassessment.
- Optionally add the loan amount, rate and term to see the principal and interest and the total monthly payment.
Formula
Monthly escrow = (property tax + insurance + other items) / 12
Cushion = monthly escrow x cushion months
New monthly escrow = (tax x (1 + tax change) + insurance x (1 + insurance change) + other) / 12
Total payment = principal and interest + monthly escrow
The cushion is a buffer the servicer may keep in the account. It is not added to the monthly payment in this tool.
Worked example
Yearly property tax of $4,800 and insurance of $1,800 make $6,600 a year, so the monthly escrow is $550 ($400 for tax and $150 for insurance). A two month cushion is $1,100.
Add a $300,000 loan at 6.5% over 30 years, with a payment of $1,896.20, and the total is $2,446.20 a month. If property tax rose 10 percent, the escrow part would rise by $40 a month.
What an escrow account does
An escrow account holds money for property related bills. The lender collects a part of each mortgage payment and pays the property tax and the insurance premium for you when they come due. The Consumer Financial Protection Bureau describes it as an account the loan servicer manages to pay certain property expenses such as taxes and homeowners insurance. Because those bills change, the escrow part of your payment can change too.
Why your payment can rise
A new property tax assessment, a higher insurance premium or a shortage in the account after a bill came in higher than expected can all raise your escrow payment. A servicer usually reviews the account once a year and tells you the new amount. The advanced fields here show what a given change would do to the monthly figure.
Related tools
See the full cost of a loan with the mortgage calculator, estimate taxes with the property tax calculator and plan the cash due at closing with the closing cost calculator.
Assumptions and limits
- Bills are spread evenly over 12 months. Real accounts follow the dates the bills are due.
- The cushion is an example value. Rules limit how large it can be, and your servicer tells you the real amount.
- Shortages, surpluses, refunds and the initial deposit at closing are not modeled.
- Principal and interest are for a fixed rate loan. This tool is an estimate and the servicer sets the actual figures.
Frequently asked questions
How is a monthly escrow payment calculated?
Add the yearly property tax, homeowners insurance and any other escrowed items, then divide by 12.
Why did my escrow payment go up?
Usually because property tax or insurance went up, or because the account was short after a bill came in higher than expected.
Can I pay property tax and insurance myself?
Sometimes. Some lenders require escrow, and others let you waive it, with conditions such as a larger down payment. Ask your lender.
What is an escrow cushion?
A small extra balance the servicer holds to cover bills that come in higher than expected. Rules cap its size and the servicer states the amount.