# Escrow account

> A mortgage escrow account collects part of each payment to pay property taxes and insurance. What it holds, the cushion limit and the yearly analysis.

URL: https://mail.mortgage-math-us.com/glossary/escrow-account/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**An escrow account** (also called an impound account) is an account your mortgage servicer sets up to pay certain property-related bills — mainly [property tax](https://mail.mortgage-math-us.com/glossary/property-tax/) and [homeowners insurance](https://mail.mortgage-math-us.com/glossary/homeowners-insurance/), and sometimes mortgage insurance — from a portion of each monthly payment.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| Maximum cushion (one-sixth of a year’s escrow bills) | 2 months | [CFPB, Regulation X 1024.17](https://www.consumerfinance.gov/rules-policy/regulations/1024/17/) | Oct 28, 2026 |
| Surplus that must be refunded | $50 | [12 CFR 1024.17(f)(2) (Regulation X)](https://www.consumerfinance.gov/rules-policy/regulations/1024/17/) | Oct 29, 2026 |
| Large shortage spread over at least | 12 months | [12 CFR 1024.17(f)(3) (Regulation X)](https://www.consumerfinance.gov/rules-policy/regulations/1024/17/) | Oct 29, 2026 |

## Example: the monthly deposit

On a $361,000 home taxed at the US effective rate of 0.89%, the yearly tax bill is about $3,213; add an average insurance premium of $1,522/yr and the account must pay $4,735 a year. That adds $395 to each monthly payment. Federal rules let the servicer keep a cushion of no more than one-sixth of the yearly total — 2 months of deposits, or $789 here.

## The yearly escrow analysis

Once a year the servicer compares what it collected with what it paid and resets your deposit. If there’s a surplus of $50 or more and you’re current, it must refund it within 30 days. If there’s a shortage of a month’s deposit or more, the servicer can’t demand it all at once; it may spread repayment over at least 12 months. That’s why your payment can change even on a [fixed-rate mortgage](https://mail.mortgage-math-us.com/glossary/fixed-rate-mortgage/).

Lenders often require escrow, and some loans require it by law. At closing you fund it with an initial deposit, part of your [prepaid items](https://mail.mortgage-math-us.com/glossary/prepaid-items/). Don’t confuse it with the escrow that holds a buyer’s [earnest money](https://mail.mortgage-math-us.com/glossary/earnest-money/) before closing. See [escrow accounts explained](https://mail.mortgage-math-us.com/blog/escrow-accounts/), and use the [mortgage payment calculator](https://mail.mortgage-math-us.com/tools/mortgage-payment-calculator/) to see escrow inside your full payment.

## Sources

- [US Census Bureau, American Community Survey 2024 1-year](https://data.census.gov/table/ACSDT1Y2024.B25077?g=010XX00US) — Median value of owner-occupied homes (2024 ACS 1-year)
- [US Census Bureau, American Community Survey 2024 1-year](https://data.census.gov/table/ACSDT1Y2024.B25103?g=010XX00US) — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- [Freddie Mac Research](https://www.freddiemac.com/research/insight/homeowners-insurance-costs) — Average annual homeowners insurance premium (Freddie Mac borrowers) (2023 data)
- [CFPB, Regulation X 1024.17](https://www.consumerfinance.gov/rules-policy/regulations/1024/17/) — Most an escrow account may hold as a cushion (one-sixth of annual escrow payments); Escrow surplus at or above this amount must be refunded to a current borrower; Escrow surplus refund due within this long after the annual escrow analysis (Oct 28, 2026)
- [CFPB: What is an escrow or impound account?](https://www.consumerfinance.gov/ask-cfpb/what-is-an-escrow-or-impound-account-en-140/)

_General information, not financial advice._