Escrow Calculator

An escrow account is a holding account managed by your mortgage servicer. Each month, a portion of your payment is deposited to cover annual property taxes and homeowner's insurance when they come due. It ensures these bills are paid on time without a large lump-sum payment.

For conventional loans with less than 20% down, most lenders require an escrow account. FHA and VA loans always require escrow. With 20% or more equity on a conventional loan, some lenders will waive the escrow requirement (sometimes for a fee).

Private Mortgage Insurance (PMI) protects the lender if you default. It is required on conventional loans when the down payment is less than 20%. Once your loan balance reaches 80% of the original home value, you can request PMI cancellation. It is automatically removed at 78%.

Your servicer performs an annual escrow analysis to reconcile actual versus projected costs. If your property taxes or insurance premiums increased, your escrow payment will go up. If there was a surplus, you may get a refund or a reduced payment.

An escrow shortage occurs when the funds collected were insufficient to cover the actual bills paid. Your servicer will notify you and either require a lump-sum payment or spread the shortage over the next 12 months by increasing your monthly payment.

Only if your lender allows it, which typically requires at least 20% equity and a good payment history. If permitted, you assume responsibility for making these payments directly on time. Missing payments can result in forced-placed insurance or tax liens, which can trigger loan default.