Compute monthly escrow + total PITI payment.
Total PITI payment
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Monthly escrow
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RESPA cushion (2 mo)
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Your breakdown
Updates live as you type| Piece of the payment | Monthly amount |
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What your lender is actually collecting each month
When your monthly mortgage payment is bigger than the loan would suggest, the gap is usually escrow. Your servicer collects one twelfth of your annual property tax and one twelfth of your homeowners insurance premium every month, parks it in an escrow account, and pays those bills on your behalf when they come due. The combined payment is known as PITI: principal, interest, taxes, and insurance. This calculator adds the escrow piece to your principal and interest, includes any private mortgage insurance, and shows the full monthly figure your servicer will draft.
It is built for buyers comparing the true monthly cost of a home and for current owners trying to make sense of an escrow statement. Escrow is mandatory on most loans when your loan-to-value ratio is above 80 percent, and it is standard on FHA and USDA loans regardless. Even when it is optional, many borrowers keep it because it turns two lumpy annual bills into a smooth monthly amount.
Building a $2,850 PITI payment
Take a loan with $2,200 a month in principal and interest, a $6,000 annual property tax bill, and $1,800 a year for homeowners insurance, with no PMI. The annual escrow items total $7,800, so the monthly escrow contribution is $7,800 divided by 12, which is $650. Add that to the $2,200 of principal and interest and the full PITI payment is $2,850 a month. Of that, $650 is going into the escrow account rather than to the lender as loan repayment.
The cushion, and why your payment changes every year
Federal law under the Real Estate Settlement Procedures Act, known as RESPA, lets a servicer hold a cushion in your escrow account of up to two months of escrow payments above the minimum needed to cover the bills. In the example that cushion is 2 times $650, or $1,300. The cushion is a buffer so the account does not run dry if a tax bill rises mid-year. Each year the servicer runs an escrow analysis, compares what it collected against what it actually paid, and adjusts your monthly amount. This is why your mortgage payment can climb even on a fixed-rate loan: rising property taxes and insurance premiums flow straight through escrow.
A practical tip: read the annual escrow analysis when it arrives. If your taxes or insurance dropped, you may be owed a refund of a surplus over $50, and you can challenge an overcollection. The common mistake is assuming a fixed-rate mortgage means a fixed payment. It does not. If your insurer hikes the premium or your county reassesses the home, expect the escrow portion to jump, and sometimes a shortfall from the prior year gets spread across the next twelve payments on top.
Escrow questions homeowners ask
Can I cancel my escrow account and pay the bills myself?
Sometimes. Many lenders allow an escrow waiver once your loan-to-value ratio falls below 80 percent and you have a clean payment history, though some charge a small fee for the privilege. Going it alone means you must budget for large tax and insurance bills yourself and never miss one, since a lapse in insurance or unpaid property tax can trigger serious consequences with your lender.
Is the money in my escrow account earning interest?
Usually not, at least not for you. A handful of states require servicers to pay interest on escrow balances, but most do not, so the cushion sits idle. That is one argument some borrowers make for waiving escrow when allowed and keeping the funds in their own high-yield savings account until the bills are due.
What happens to my escrow balance when I sell or refinance?
The account is settled and the remaining balance comes back to you. When you pay off or refinance the loan, the servicer closes the escrow account and is generally required to refund any surplus within about 20 days. On a refinance you often fund a new escrow account at closing, so for a stretch you may have money tied up in both until the old one is returned. Watch for that overlap so you are not surprised by the cash needed to close.