When you’re buying a house, there are lots of things to keep track of. One important number is your escrow balance. But what is it and why does it matter?

In short, an escrow balance is the amount of money you have saved up to cover your property taxes and homeowners insurance.

You might be asking, “What happens if I don’t have enough money saved in my escrow account?” Don’t worry, we’re here to help! In this post, we’ll explain what is an escrow balance and how it affects you.


Your escrow balance is the amount set aside each month to pay for your property taxes and homeowners insurance. When your taxes or insurance are due, your mortgage company will take the money out of your escrow balance to pay those bills.

The escrow balance is calculated by adding up the total amount of money you have paid into escrow over the year, then subtracting any money that has been used to pay your taxes and insurance. The remaining balance is available to cover future expenses.

How Does Escrow Balance Work?

Your mortgage lender will review your escrow balance annually to make sure that there are sufficient funds to cover the upcoming year’s taxes and insurance. If the escrow balance is insufficient, you (the borrower) will be required to deposit additional funds.

Conversely, if there are excess funds in the escrow account, you (the borrower) may be entitled to a refund. You can check your escrow balance by contacting your lender or servicer.

Most lenders will also provide this information online or on your monthly mortgage statement. By tracking your escrow balance, you can ensure that there are sufficient funds to cover your annual tax and insurance expenses.

Do You Have The Option To Access Your Escrow Balance?

In most cases, you can’t access this money directly — it’s held in escrow for paying your yearly property tax bill and insurance premium (including any associated escrow fees).

While the money in your escrow account is technically yours, it’s important to remember that it’s being held in escrow for a specific purpose. For that reason, most lenders don’t pay interest on escrow balances.

If you have questions about your escrow balance, your best bet is to contact your lender or loan servicing company directly. They’ll be able to give you the most up-to-date information about your specific situation.

Who Manages My Escrow Account?

Who manages the escrow account depends on where you are in the escrow process. An escrow account opens when you start escrow, and your deposits are used to pay your property taxes and insurance when they come due.

While in escrow, you continue to make monthly deposits to maintain a balance in the account. Your mortgage servicer manages the escrow account until closing when ownership of the property transfers to you.

Additionally, your escrow agent will provide you with documentation showing you that the escrow balance is paid in full and will then close out the account. Again, if there’s a shortage or overage in the escrow account, your mortgage servicer may adjust your monthly payments to make up the difference.


Having an escrow account is not mandatory. Some homeowners choose to escrow their taxes and insurance because it makes budgeting easier. They know precisely how much they need to set aside each month, and they don’t have to worry about coming up with a large sum of money when their tax and insurance bills are due.

Others prefer not to escrow because it lowers their monthly mortgage payment. They may decide to invest the money they would have escrowed or simply use it to make additional principal payments on their loan.

However, keep in mind that there are certain loans that require you to have an escrow, such as a FHA or VA loan.

Ultimately, whether you escrow your taxes and insurance is a personal decision, but keep in mind that you will still have to pay something. You should weigh the pros and cons to see what makes the most sense for you financially.

Should You Put Extra Money In Your Escrow?

Most lenders will accept extra funds as long as you specify that the money is for the escrow account. If you have extra money and want to put it toward your mortgage, you may add it to your escrow balance. Doing so can give you a cushion in case of a potential escrow shortfall or help you pay down your mortgage more quickly.

Before changing your escrow payments, be sure to check with your lender to see if there are any restrictions or requirements. By carefully managing your escrow balance, you can stay on track with your mortgage payments and put yourself in a better financial position.


We covered a lot of information about escrow balances, so here’s a summary of what you learned:

  • An escrow account is a bank account that holds money for future payments.
  • The most common use of an escrow account is to hold funds for property taxes and homeowner’s insurance premiums.
  • The money in your escrow account is yours, and you can use it however you like. However, if there isn’t enough money in your account when it comes time to pay your property taxes or homeowner’s insurance premium, the lender may require you to make up the difference.
  • If you have extra cash each month, you might deposit it into your escrow account. This will help ensure that you always have enough funds saved up to cover your property tax and homeowners insurance payments.
  • Escrow accounts are not mandatory for all mortgages, but they can be a helpful tool if used correctly.


Escrow balances are an important part of the home-buying process. By understanding how they work, you can ensure a smooth and stress-free payment process during your home ownership journey.

And if you need help finding the best homeowners insurance coverage for the best price, start by speaking to a SimplyIOA agent at 833.872.4467 or get a homeowners insurance quote online now.