Mortgage escrow accounts: what they are and why your payment changes
Escrow spreads your property tax and insurance bills across your monthly payment. Here is how it works.
Sourced from official pages · Updated September 30, 2026💡 Key takeaways
- An escrow account collects part of your monthly payment to pay property taxes and insurance.
- Your total monthly payment changes when taxes or insurance change, even on a fixed-rate loan.
- Your servicer manages it and sends an annual analysis.
- You can review it if you see problems and ask your servicer questions.
What escrow is
An escrow (or impound) account is set up by your lender to pay certain property-related expenses. A portion of each monthly mortgage payment goes into it, and your servicer pays bills such as property taxes and insurance premiums when they are due.
Why your payment can change
Property taxes and insurance premiums can change from year to year, so your escrow payment — and your total monthly payment — changes with them, even on a fixed-rate loan. Only principal and interest stays fixed.
Estimate the full payment
Our mortgage calculator lets you add property tax and insurance to see a realistic monthly total.
If something looks wrong
CFPB has a guide on what to do about problems with an escrow or impound account.
How the monthly amount is built (hypothetical)
| Item | Annual | Monthly escrow |
|---|---|---|
| Property taxes | $4,800 | $400 |
| Homeowners insurance | $1,800 | $150 |
| Total | $6,600 | $550 |
This amount is added to principal and interest. Actual figures depend on your property and lender.
Annual escrow analysis
Your servicer reviews the account each year. If bills rose, your payment may increase and you may have a shortage; if they fell you may get a refund. Ask the servicer how a shortage can be repaid.
🔤 Key terms
| Term | Meaning |
|---|---|
| Escrow (impound) account | Account held by your servicer to pay taxes and insurance |
| Escrow shortage | Not enough in the account to pay bills; may raise your payment |
| Escrow cushion | A small extra balance the servicer may keep |
| Annual escrow analysis | Yearly review of the account |
Steps if your payment jumps
- Read the annual escrow statement.
- Check whether taxes or insurance changed.
- Ask the servicer how a shortage is repaid.
- Shop for homeowners insurance if the premium rose sharply.
⚠️ Common mistakes to avoid
- Forgetting escrow when budgeting for a home.
- Ignoring the annual analysis.
- Not checking that taxes and insurance are paid on time.
- Assuming a fixed rate means a fixed total payment.
🛠️ Try it yourself
❓ Frequently asked questions
Can I cancel escrow?
Some lenders allow it under conditions; ask yours.
What if my insurance premium rises?
Your escrow payment will typically rise at the next analysis.
Who pays my property taxes?
If you have escrow, your servicer pays them from the account.
📚 Sources
This guide is general information, not financial, tax or legal advice. Rules and limits change; confirm with the sources above or a licensed professional.