Understanding Escrow Accounts and How They Work

An escrow account sets aside part of your monthly payment to cover property taxes and insurance when they come due. It smooths out big annual bills so you don’t get surprise expenses.

Setup and Cushion

At closing, lenders collect a few months of taxes and insurance to seed the account. Most servicers keep a small cushion, typically up to two months of escrowed items, to absorb changes.

Annual Analysis

Each year your servicer compares what was collected vs. what was paid. If bills rose, you may see a shortage (added to the new payment or paid lump‑sum). If bills fell, you may receive a surplus refund.

How to Minimize Surprises

Shop insurance annually, understand local tax cycles, and expect adjustments after reassessment or improvements.

FAQs

Q: Can I waive escrow?

A: Sometimes, with strong credit and equity, but you’ll then pay taxes and insurance directly. Some programs require escrow.

Q: Why did my mortgage payment go up if my rate didn’t change?

A: Escrowed taxes/insurance increased; the principal and interest stayed the same.

How Jaffe Home Loans Can Help

Have questions about your next step? Get a no‑pressure consult with Jaffe Home Loans. We’ll compare programs, run the numbers, and build a financing plan around your goals. Start your pre‑approval today.