Escrow Calculator: Monthly Property Tax & Insurance

Is $550.00 a month the right escrow?

On the defaults — $4,800.00 of property tax and $1,800.00 of homeowners insurance a year, with no PMI — the monthly escrow is $550.00, the yearly total is $6,600.00, the tax share is $400.00 a month and the insurance share is $150.00 a month. Escrow is the part of a monthly mortgage payment the lender holds to pay the property tax and homeowners insurance bills when they come due — it is not the loan itself. Lenders usually require an escrow account when the down payment is under 20%, and once a year the lender does an escrow analysis and adjusts the monthly amount if the tax or the premium rose.

Five things about the model are worth stating plainly. First, the annual escrow is the three yearly bills added together — $4,800.00 + $1,800.00 + $0.00 = $6,600.00. Second, the monthly escrow is the annual total divided by 12 — $6,600.00 ÷ 12 = $550.00. Third, the tax share is the tax divided by 12 — $4,800.00 ÷ 12 = $400.00. Fourth, the insurance share is the insurance divided by 12 — $1,800.00 ÷ 12 = $150.00. And fifth, the shares add back to the monthly escrow — $400.00 + $150.00 + $0.00 = $550.00; all listed in Accuracy & limitations.

The worked example, line by line

Setup: $4,800.00 of property tax, $1,800.00 of homeowners insurance, $0.00 of PMI a year.

Line 1 — the annual escrow. The annual escrow is $4,800.00 + $1,800.00 + $0.00 = $6,600.00.

Line 2 — the monthly escrow. The monthly escrow is $6,600.00 ÷ 12 = $550.00.

Line 3 — the tax share. The tax share is $4,800.00 ÷ 12 = $400.00 a month.

Line 4 — the insurance share. The insurance share is $1,800.00 ÷ 12 = $150.00 a month.

Line 5 — the PMI share. The PMI share is $0.00 ÷ 12 = $0.00 a month.

Line 6 — the check. $400.00 + $150.00 + $0.00 = $550.00, the monthly escrow.

Line 7 — the shortage. If the tax rises to $5,400 next year, the monthly escrow becomes $600.00 — $50.00 more a month, $600.00 more a year.

Every branch, checked

Tax $6,000: Monthly escrow $650.00; annual escrow $7,800.00; tax share $500.00 a month; insurance share $150.00 a month; PMI share $0.00 a month — A $6,000.00 tax bill adds $100.00 a month to the escrow — the tax share rises from $400.00 to $500.00, and everything else stays put.

Insurance $2,400: Monthly escrow $600.00; annual escrow $7,200.00; tax share $400.00 a month; insurance share $200.00 a month; PMI share $0.00 a month — A $2,400.00 premium adds $50.00 a month — the insurance share rises from $150.00 to $200.00, and the monthly escrow reaches $600.00.

PMI $1,200 a year: Monthly escrow $650.00; annual escrow $7,800.00; tax share $400.00 a month; insurance share $150.00 a month; PMI share $100.00 a month — $1,200.00 of PMI a year is $100.00 a month on top of the $550.00 — the monthly escrow becomes $650.00, and the PMI share is visible on its own.

Tax $3,600, insurance $1,200: Monthly escrow $400.00; annual escrow $4,800.00; tax share $300.00 a month; insurance share $100.00 a month; PMI share $0.00 a month — A cheaper house with a $3,600.00 tax bill and a $1,200.00 premium costs $400.00 a month in escrow — $150.00 less than the defaults.

Tax $12,000, insurance $3,600: Monthly escrow $1,300.00; annual escrow $15,600.00; tax share $1,000.00 a month; insurance share $300.00 a month; PMI share $0.00 a month — A $12,000.00 tax bill and a $3,600.00 premium add up to $15,600.00 a year — $1,300.00 a month, with the tax share alone at $1,000.00.

Tax $9,600, insurance $2,400, PMI $600: Monthly escrow $1,050.00; annual escrow $12,600.00; tax share $800.00 a month; insurance share $200.00 a month; PMI share $50.00 a month — All three bills together — $9,600.00 of tax, $2,400.00 of insurance and $600.00 of PMI — come to $12,600.00 a year, or $1,050.00 a month.

Tax $2,400: Monthly escrow $350.00; annual escrow $4,200.00; tax share $200.00 a month; insurance share $150.00 a month; PMI share $0.00 a month — Halving the tax bill to $2,400.00 halves the tax share to $200.00 a month, and the monthly escrow falls to $350.00.

The reverses, worked backwards

Smallest whole-dollar annual tax for the monthly escrow to reach $600.00: At the displayed $5,400 the figures are Monthly escrow $600.00; annual escrow $7,200.00; tax share $450.00 a month; insurance share $150.00 a month; PMI share $0.00 a month. At the displayed $5,400 the monthly escrow is $600.00. At $5,399 the monthly escrow is $599.92 — below $600, so $5,400 is the smallest whole-dollar tax that reaches the target.

Smallest whole-dollar annual insurance for the monthly escrow to reach $700.00: At the displayed $3,600 the figures are Monthly escrow $700.00; annual escrow $8,400.00; tax share $400.00 a month; insurance share $300.00 a month; PMI share $0.00 a month. At the displayed $3,600 the monthly escrow is $700.00. At $3,599 the monthly escrow is $699.92 — below $700, so $3,600 is the smallest whole-dollar insurance that reaches the target.

Smallest whole-dollar annual PMI for the monthly escrow to reach $600.00: At the displayed $600 the figures are Monthly escrow $600.00; annual escrow $7,200.00; tax share $400.00 a month; insurance share $150.00 a month; PMI share $50.00 a month. At the displayed $600 the monthly escrow is $600.00. At $599 the monthly escrow is $599.92 — below $600, so $600 is the smallest whole-dollar PMI that reaches the target.

Smallest whole-dollar annual tax for the annual escrow to reach $10,000.00: At the displayed $8,200 the figures are Monthly escrow $833.33; annual escrow $10,000.00; tax share $683.33 a month; insurance share $150.00 a month; PMI share $0.00 a month. At the displayed $8,200 the annual escrow is $10,000.00. At $8,199 the annual escrow is $9,999.00 — below $10,000, so $8,200 is the smallest whole-dollar tax that reaches the target.

Smallest whole-dollar annual tax for the monthly escrow to reach $1,000.00: At the displayed $8,400 the figures are Monthly escrow $1,000.00; annual escrow $12,000.00; tax share $700.00 a month; insurance share $200.00 a month; PMI share $100.00 a month. At the displayed $8,400 the monthly escrow is $1,000.00. At $8,399 the monthly escrow is $999.92 — below $1,000, so $8,400 is the smallest whole-dollar tax that reaches the target.

Largest whole-dollar annual tax for the monthly escrow to stay at or below $500.00: At the displayed $4,200 the figures are Monthly escrow $500.00; annual escrow $6,000.00; tax share $350.00 a month; insurance share $150.00 a month; PMI share $0.00 a month. At the displayed $4,200 the monthly escrow is $500.00. At $4,201 the monthly escrow is $500.08 — above $500, so $4,200 is the largest whole-dollar tax for the monthly escrow to stay at or below $500.00.

What the defaults assume

The defaults are $4,800.00 of property tax, $1,800.00 of homeowners insurance and $0.00 of PMI a year — Monthly escrow $550.00; annual escrow $6,600.00; tax share $400.00 a month; insurance share $150.00 a month; PMI share $0.00 a month. With Tax $6,000, Monthly escrow $650.00; annual escrow $7,800.00; tax share $500.00 a month; insurance share $150.00 a month; PMI share $0.00 a month. With Insurance $2,400, Monthly escrow $600.00; annual escrow $7,200.00; tax share $400.00 a month; insurance share $200.00 a month; PMI share $0.00 a month. With PMI $1,200 a year, Monthly escrow $650.00; annual escrow $7,800.00; tax share $400.00 a month; insurance share $150.00 a month; PMI share $100.00 a month. With Tax $3,600, insurance $1,200, Monthly escrow $400.00; annual escrow $4,800.00; tax share $300.00 a month; insurance share $100.00 a month; PMI share $0.00 a month. With Tax $12,000, insurance $3,600, Monthly escrow $1,300.00; annual escrow $15,600.00; tax share $1,000.00 a month; insurance share $300.00 a month; PMI share $0.00 a month. With Tax $9,600, insurance $2,400, PMI $600, Monthly escrow $1,050.00; annual escrow $12,600.00; tax share $800.00 a month; insurance share $200.00 a month; PMI share $50.00 a month. With Tax $2,400, Monthly escrow $350.00; annual escrow $4,200.00; tax share $200.00 a month; insurance share $150.00 a month; PMI share $0.00 a month. With All zero, Monthly escrow $0.00; annual escrow $0.00; tax share $0.00 a month; insurance share $0.00 a month; PMI share $0.00 a month. With Tax $0, insurance $1,800, Monthly escrow $150.00; annual escrow $1,800.00; tax share $0.00 a month; insurance share $150.00 a month; PMI share $0.00 a month. With Insurance $0, tax $4,800, Monthly escrow $400.00; annual escrow $4,800.00; tax share $400.00 a month; insurance share $0.00 a month; PMI share $0.00 a month. With Tax $24,000, insurance $6,000, PMI $2,400, Monthly escrow $2,700.00; annual escrow $32,400.00; tax share $2,000.00 a month; insurance share $500.00 a month; PMI share $200.00 a month. With Tax $100, Monthly escrow $158.33; annual escrow $1,900.00; tax share $8.33 a month; insurance share $150.00 a month; PMI share $0.00 a month — 1900 ÷ 12 is 158.3333…, which rounds to $158.33. With Tax $4,801, Monthly escrow $550.08; annual escrow $6,601.00; tax share $400.08 a month; insurance share $150.00 a month; PMI share $0.00 a month — 6601 ÷ 12 is 550.0833…, which rounds to $550.08. With Shortage — taxes rise from $4,800 to $5,400, Monthly escrow $600.00; annual escrow $7,200.00; tax share $450.00 a month; insurance share $150.00 a month; PMI share $0.00 a month — the increase is $50.00 a month and $600.00 a year.

All zero: Monthly escrow $0.00; annual escrow $0.00; tax share $0.00 a month; insurance share $0.00 a month; PMI share $0.00 a month.

Tax $0, insurance $1,800: Monthly escrow $150.00; annual escrow $1,800.00; tax share $0.00 a month; insurance share $150.00 a month; PMI share $0.00 a month.

Insurance $0, tax $4,800: Monthly escrow $400.00; annual escrow $4,800.00; tax share $400.00 a month; insurance share $0.00 a month; PMI share $0.00 a month.

Tax $24,000, insurance $6,000, PMI $2,400: Monthly escrow $2,700.00; annual escrow $32,400.00; tax share $2,000.00 a month; insurance share $500.00 a month; PMI share $200.00 a month.

Tax $100: Monthly escrow $158.33; annual escrow $1,900.00; tax share $8.33 a month; insurance share $150.00 a month; PMI share $0.00 a month.

Tax $4,801: Monthly escrow $550.08; annual escrow $6,601.00; tax share $400.08 a month; insurance share $150.00 a month; PMI share $0.00 a month.

Shortage — taxes rise from $4,800 to $5,400: Monthly escrow $600.00; annual escrow $7,200.00; tax share $450.00 a month; insurance share $150.00 a month; PMI share $0.00 a month.

Output · formula · meaning

Who uses this

• The new homeowner reading the first mortgage statement: they learn the $550.00 of escrow is $400.00 of tax and $150.00 of insurance — and they check the $5,400 reverse to see the tax that would push the monthly escrow to $600.00.
• The homeowner whose tax bill just rose: they learn a rise from $4,800 to $5,400 adds $50.00 a month and $600.00 a year — and they check the shortage edge to see the new $600.00 monthly escrow.
• The buyer putting less than 20% down: they learn PMI of $1,200.00 a year adds $100.00 a month — and they check the $600 reverse to see the PMI that would push the monthly escrow to $600.00.
• The homeowner budgeting a $500.00 escrow: they learn the tax must stay at or below $4,200 a year — and they check the $8,200 reverse to see the tax that would push the annual escrow to $10,000.00.

Accuracy & limitations

The math is first-principles: the annual escrow is the three yearly bills added together, rounded to cents; the monthly escrow is the annual total divided by 12, rounded to cents half-up; each share is its own yearly bill divided by 12, rounded to cents half-up. Two branches land on repeating decimals — 1900 ÷ 12 is 158.3333… and rounds to $158.33, and 6601 ÷ 12 is 550.0833… and rounds to $550.08 — so the shares can add to a cent more or less than the monthly escrow. What the model cannot do is predict your lender’s escrow analysis: the lender may keep a cushion of up to two months of escrow payments on top of the expected bills under RESPA, a shortage is usually spread over the next 12 months, and the tax and the premium can both rise in the same year. Use it to see what the escrow is made of — then check the lender’s annual escrow analysis for the number that actually lands on the statement.

Frequently asked questions