How a mortgage escrow account works
A mortgage escrow account holds part of each monthly payment so your servicer can pay property taxes and homeowners insurance when they are due. Once a year the servicer reviews the account in an escrow analysis. If the bills went up, you may owe a shortage and your monthly payment rises; if there is extra, you may get a refund. Read that annual statement.
Why it matters: When the tax or insurance bill rises, the escrow account is why your mortgage payment changes.
Steps
- Find the escrow line on your monthly statement to see what goes into it.
- Read the annual escrow analysis when it arrives, usually once a year.
- Compare the new tax and insurance amounts with last year's.
- If there is a shortage, choose between paying it at once or spreading it, if offered.
- Check that the servicer paid your tax and insurance bills on time.
- Tell the servicer if you change insurance companies, and send proof of the new policy.
Stop and call a professional if
- a tax bill or insurance premium was not paid from escrow: contact your servicer in writing at once
- you need a recommendation for your own loan, policy or tax situation: ask a licensed loan officer, housing counselor, insurance agent or tax professional
Questions to ask the professional
- Why did my escrow payment change?
- Can I spread this shortage over the year?
Common mistakes
- Ignoring the annual escrow analysis letter.
- Switching insurers without telling the servicer.
- Assuming a fixed rate means a fixed payment forever.
Teach this to someone
A one page sheet for showing a friend, a teenager or a parent: what to say, what to show, and one question to check it landed.
Teach: How a mortgage escrow account works
What to say
A mortgage escrow account holds part of each monthly payment so your servicer can pay property taxes and homeowners insurance when they are due. Once a year the servicer reviews the account in an escrow analysis. If the bills went up, you may owe a shortage and your monthly payment rises; if there is extra, you may get a refund. Read that annual statement.
What to show
- Find the escrow line on your monthly statement to see what goes into it.
- Read the annual escrow analysis when it arrives, usually once a year.
- Compare the new tax and insurance amounts with last year's.
- If there is a shortage, choose between paying it at once or spreading it, if offered.
- Check that the servicer paid your tax and insurance bills on time.
- Tell the servicer if you change insurance companies, and send proof of the new policy.
Where it stops
Stop and call a professional if a tax bill or insurance premium was not paid from escrow: contact your servicer in writing at once.
Check question
What does an escrow account usually pay?
Answer: Property taxes and homeowners insurance. Those are the bills the servicer pays for you.
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Sources
- US federal consumer guidance on mortgage disclosures and closing, 2025. Reviewed September 28, 2026.
Written in our own words from the sources above. It is general information, not advice for your situation; where a professional, your doctor or your lease says something different, follow them.
Last reviewed . First published .