Escrow Payment Calculator
Calculate your monthly escrow payment for property taxes and homeowner insurance.
An escrow account is a special account held by your mortgage lender to pay property taxes and homeowner’s insurance on your behalf. Instead of making large lump-sum payments when these bills come due, you pay a portion each month as part of your mortgage payment.
How escrow payments are calculated: Your monthly escrow payment is the sum of all annual escrow expenses divided by 12:
Monthly Escrow = (Annual Property Tax + Annual Insurance + Annual PMI + Other Annual Escrow Items) / 12
Your total monthly housing payment then becomes:
Total Payment = Mortgage Principal & Interest + Monthly Escrow
Property taxes: Property taxes are assessed by local governments based on the assessed value of your property. Rates vary dramatically by location — from less than 0.5% in some areas to over 2.5% in others. The national average in the United States is approximately 1.1% of the home’s assessed value.
Homeowner’s insurance: This protects your home against damage from fire, storms, theft, and other covered perils. Average annual premiums range from $1,000 to $3,000 depending on location, home value, coverage level, and deductible. Flood insurance and earthquake insurance are typically separate policies.
Private Mortgage Insurance (PMI): If your down payment was less than 20% of the home’s purchase price, your lender typically requires PMI. Rates range from 0.3% to 1.5% of the original loan amount per year. PMI can be removed once you reach 20% equity in your home.
Escrow cushion: Lenders are allowed to maintain a cushion (usually two months of escrow payments) in your account to protect against shortages if tax or insurance rates increase. This is regulated by the Real Estate Settlement Procedures Act (RESPA).
Annual escrow analysis: Lenders review your escrow account annually. If expenses have increased, your monthly payment goes up. If there is a surplus above the allowed cushion, you receive a refund. If there is a shortage, you can pay it in a lump sum or have it spread over 12 months.
Why escrow matters for budgeting: Escrow makes housing costs more predictable by spreading large annual expenses into manageable monthly amounts. Without escrow, homeowners must save separately for large tax and insurance bills, which can be challenging.