Calculate your monthly escrow payment for property taxes, homeowners insurance, and PMI. See escrow analysis with cushion, shortage, and surplus scenarios.
Your mortgage servicer collects money each month for property taxes and insurance through an escrow account. This ensures these critical bills are paid on time, but the exact monthly amount can be confusing — especially when it changes during your annual escrow analysis. Many homeowners are surprised the first time their monthly payment increases due to a tax reassessment or insurance premium hike they did not anticipate.
An escrow payment is calculated by dividing your total annual disbursements (taxes, insurance, and sometimes PMI) by 12, then adding a cushion — typically two months of reserves as allowed by federal law (RESPA). When your tax bill increases or your insurance premium changes, the escrow amount is recalculated, sometimes resulting in a shortage that raises your monthly payment or a surplus that entitles you to a refund.
This Escrow Payment Calculator shows your base monthly escrow, the required cushion, and what happens when costs change. Use it to anticipate escrow adjustments, verify your lender's analysis, or plan for upcoming increases before they appear on your mortgage statement.
Escrow changes catch many homeowners off guard. A property tax reassessment or insurance rate hike can increase your monthly payment by $100 or more. By calculating your escrow proactively, you can budget for changes before they hit and verify that your lender's annual analysis is correct. This calculator also helps you understand the cushion requirements under RESPA so you know how much extra your servicer is legally allowed to hold.
Monthly Escrow = (Annual Taxes + Annual Insurance + Annual PMI) ÷ 12. Cushion = (Monthly Escrow × Cushion Months). When current balance is known: Shortage = Required Balance − Current Balance; Surplus = Current Balance − Required Balance.
Result: $683/mo base + $1,367 cushion
Total annual disbursements are $8,200 ($5,200 taxes + $1,800 insurance + $1,200 PMI). Dividing by 12 gives a base escrow of $683/month. The 2-month cushion requires $1,367 in reserves. During the first year, the servicer may spread the cushion across 12 payments, adding ~$114/month for a total of $797/month.
When you close on a home with a mortgage, the lender typically sets up an escrow account. Each month, a portion of your payment goes into this account earmarked for property taxes and insurance. When those bills come due — usually semi-annually for taxes and annually for insurance — the servicer pays them from the escrow balance.
Once a year, your servicer reviews the escrow account. They project the next 12 months of disbursements, calculate the required monthly collection, and compare it to the current balance. If there is a projected shortage, your monthly payment increases. If there is a surplus exceeding $50, the servicer must refund it.
RESPA Section 10 limits the escrow cushion to one-sixth of the total annual disbursements — effectively two months of escrow payments. This buffer protects against unexpected tax increases or insurance rate hikes. Some states impose stricter limits, so your actual cushion may be smaller than the federal maximum.
An escrow account is a special account managed by your mortgage servicer that holds funds for property taxes, homeowners insurance, and sometimes PMI. A portion of each monthly mortgage payment goes into escrow, and the servicer pays these bills on your behalf when they come due.
Your servicer performs an annual escrow analysis to compare what was collected versus what was disbursed. If property taxes or insurance premiums increased, you'll have a shortage and your monthly payment rises. If costs decreased, you may receive a surplus refund.
Federal law (RESPA) allows servicers to maintain a cushion of up to two months of escrow payments as a buffer against unexpected increases. This cushion is factored into your monthly escrow amount, especially during the first year.
Some lenders allow escrow waivers if you have at least 20 % equity. You may need to pay a one-time fee (typically 0.25 % of the loan). Without escrow, you're responsible for paying tax and insurance bills directly and on time.
If the shortage is less than one month's escrow payment, the servicer spreads it over 12 months. Larger shortages may require a lump-sum payment or a shorter repayment period. You always have the option to pay the shortage in full to avoid higher monthly payments.
Lender-paid PMI is not collected through escrow, but borrower-paid PMI almost always is. If your lender requires PMI and collects it through escrow, it will be included in your total monthly escrow disbursement until the PMI is removed at 80 % LTV.