Escrow Account Calculator
Your monthly mortgage payment typically includes four components, known as PITI: principal, interest, taxes, and insurance. The taxes and insurance portions are collected into an escrow account by your servicer, who then pays those bills on your behalf. Under the Real Estate Settlement Procedures Act (RESPA), lenders may also require a cushion of up to two months of escrow payments to protect against shortfalls. This calculator shows your monthly escrow payment, the required initial cushion, and the total amount collected at closing for prepaid escrow items.
Escrow calculation formula
Monthly Escrow = (Annual Tax + Annual Insurance + Annual PMI) / 12
Initial Cushion = Monthly Escrow * Cushion Months (max 2)
Total Annual = Monthly Escrow * 12
RESPA (12 U.S.C. 2609) limits the cushion to no more than 2 months of the monthly escrow amount. The cushion protects against shortfalls if tax or insurance bills increase. Your servicer performs an annual escrow analysis to adjust the monthly amount if needed.
Escrow account facts
- Escrow is typically required when your loan-to-value ratio exceeds 80% (i.e., you have PMI).
- Once your LTV drops to 80%, you may request escrow waiver on some conventional loans, though lenders may charge a fee.
- Your servicer must send you an annual escrow analysis showing projected disbursements and any overage or shortage.
- If your escrow has an overage of more than $50, your servicer must refund it to you (RESPA rule).
- The Closing Disclosure shows the upfront escrow prepaids you must bring to closing.
Escrow account: frequently asked questions
What is a mortgage escrow account?
An escrow account (also called an impound account) is a separate account maintained by your mortgage servicer. Each month, a portion of your mortgage payment is deposited into this account, and the servicer uses those funds to pay your property taxes and homeowner's insurance premiums when they come due.
How is the monthly escrow amount calculated?
The monthly escrow amount is: (Annual Property Tax + Annual Homeowner's Insurance) / 12. Lenders may also collect a cushion or reserve, which is typically 2 months of escrow payments, to cover potential shortfalls. Total escrow at closing may include several months of prepaid amounts.
What is RESPA and how does it limit escrow cushions?
The Real Estate Settlement Procedures Act (RESPA) limits the escrow cushion a lender can require to no more than 2 months of escrow payments. Your annual escrow analysis statement will show whether your account is over or under funded.
What happens if my escrow account is short?
If taxes or insurance rise, your servicer will send an escrow shortage notice and either increase your monthly payment to make up the shortage over the next 12 months or require a lump-sum payment.
Does PMI go through the escrow account?
Private mortgage insurance (PMI) is sometimes included in the escrow payment. Check your loan documents. If PMI is escrowed, add the annual PMI premium to your annual escrow calculation.
Official sources
- Consumer Financial Protection Bureau: What is an escrow or impound account?
- HUD RESPA: RESPA Home.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.