A simple tool that audits your mortgage escrow account to ensure your monthly deposits cover upcoming property tax, insurance, and fees, and identifies if adjustments are needed.
Enter your starting escrow balance, annual property taxes, insurance premiums, and HOA fees along with your current monthly escrow payment. The calculator projects monthly inflows and outflows over the next year, checks for shortages or surpluses, and recommends new monthly payments to keep your escrow account balanced.
With a $1,500 starting escrow balance, $6,000 annual property tax, $1,200 insurance, $600 HOA fees, and $600 monthly escrow payment, the calculator projects your monthly balances and alerts if you need to increase or decrease payments.
Your escrow payment changes because your property taxes, insurance premiums, or other escrowed items can increase or decrease annually. The lender performs an escrow analysis to recalibrate your monthly payment to cover these changes and ensure the escrow account stays balanced.
A shortage occurs when your escrow account does not have enough funds to cover upcoming payments. You can either pay the shortage in full or have it spread out over the next 12 months, increasing your monthly escrow payments.
If you have a surplus greater than $50, the lender is required to refund this amount to you. If the surplus is less than $50, it will be applied to future escrow payments, reducing your monthly amount.
Opting out is sometimes possible if you have 20% or more equity in your home and meet your lender’s credit requirements. Otherwise, escrow accounts are usually mandatory, especially for loans with high loan-to-value ratios.
An escrow cushion is a reserve that lenders require to keep in your escrow account, usually equal to two months’ worth of escrow payments, to protect against unexpected increases in taxes or insurance.
Lenders generally conduct an escrow analysis annually, often around the anniversary of your loan closing or payment anniversary. The results are sent to you as a statement reflecting any payment changes.