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Mortgage Escrow Accounts: Following the Tax and Insurance Money

Paying taxes and insurance through escrow can spread large bills across the year, but you still need to check that the payments reach the right place. Review the account analysis alongside actual tax and insurance notices. A changing mortgage payment, a shortage, or an unpaid-tax letter each calls for a different question about the account.

The questions below use selected Consumer Financial Protection Bureau guidance, adapted and organized by Fynoptic. Source links and the dates displayed by those sources are provided at the end.

What is an escrow or impound account?

An escrow account, sometimes called an impound account depending on where you live, is set up by your mortgage lender to pay certain property-related expenses.

The money that goes into the account comes from a portion of your monthly mortgage payment. An escrow account helps you pay these expenses because you send money through your lender or servicer, every month, instead of having to pay a big bill once or twice a year.

Many lenders require that you pay your taxes and insurance using escrow, so they can make sure that the bill gets paid. Your mortgage servicer will manage the escrow account and pay these bills on your behalf. Sometimes, escrow accounts may also be required by law.

Your property taxes and insurance premiums can change from year to year. Your escrow payment—and with it, your total monthly payment will change accordingly.

Tip: If your loan doesn’t include an escrow account, you will have to plan to pay these large expenses yourself. Be sure you budget for these extra costs and stay current on your taxes and insurance payments. If you fail to pay your property taxes, your state or local government may impose fines and penalties or place a tax lien on your home. You could also face foreclosure.

In addition, if you fail to pay your taxes or insurance, your lender may:

  • Add the amounts to your loan balance
  • Add an escrow account to your loan
  • Purchase new homeowners insurance for you and bill you for it. This lender-purchased insurance, known as force-placed insurance, is typically more expensive than homeowners insurance you pay on your own.

Even if your lender does not require an escrow account, consider requesting one voluntarily. An escrow account makes it easier to budget for your large property-related bills by paying small amounts with each mortgage payment. That way you don’t have to scramble to pay a large property tax bill or insurance premium when it comes due.

Is there a limit on how much my mortgage lender can make me pay into an escrow account for interest and taxes?

Yes, if your loan is a federally related mortgage loan under the Real Estate Settlement Procedures Act (RESPA), there is a limit on how much the lender can make you pay into an escrow account.

While an escrow account is not required for every loan, it can be an important protection for you because it helps make sure you have the money you need to pay taxes and insurance when they are due. Failing to pay taxes and insurance can result in additional costs and fees and even lead to foreclosure.

If you have an escrow account with your mortgage, you generally will have to pay a certain amount into escrow at closing, as a part of your “cash to close.” You may also have to pay into your escrow account an amount for taxes and insurance as part of your regular mortgage payment. If your loan is a federally related mortgage loan under RESPA, then there are limits on how much a lender can make you pay, both at closing and in your recurring mortgage payments.

Before your loan closes, the lender will estimate the total annual expenses that need to be paid from the escrow account. They can require you to pay a part of the estimated annual total in advance, but only enough to make sure that the escrow account never carries a negative balance, plus an additional two months’ worth of estimated disbursements to serve as a cushion. On top of these amounts, every month, your mortgage servicer can require you to pay up to one-twelfth of the total annual escrow payments that they reasonably anticipate paying out of the escrow account. For most mortgages with an escrow account, the loan servicer must provide an initial and annual escrow account statement that shows the account history and a projection of activity for the next year.

If you have a loan that’s considered “higher-priced” under the Truth in Lending Act then you might be required to pay into an escrow account for at least the first five years of the loan. Some loan types require escrow for the entire term of the loan. You’ll be notified by the lender or servicer if your loan is in this category, or if there’s an exception that applies to you.

See our Guide to Buying a Housefor more information about the home lending process and costs of closing on a home.

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What should I do if I’m having problems with my escrow or impound account?

If you’re having problems with your escrow or impound account, contact your mortgage servicer right away. You may need to send an information request or notice of error.

An escrow account is an account set up by your mortgage lender to pay certain property-related expenses on your behalf, like property taxes and homeowners insurance. It’s set up to help you pay these expenses through your lender or servicer, little by little every month, instead of you getting a big bill once or twice a year. An escrow account is sometimes called an impound account. Learn more about how escrow accounts work.

Your property taxes and insurance premiums can change from year to year. If your property taxes and/or insurance premiums change, your total monthly payment will change.

It’s important to monitor your mortgage statements, and tax and insurance bills, so you can quickly identify issues with your escrow account if they arise.

Signs that there could be an issue with your escrow account include:

  • Changes in your total monthly payment without being notified that your taxes or insurance premiums are going to change
  • Servicer-purchased force-placed insurance, which your servicer is allowed to purchase and charge you for under certain circumstances
  • A notice from your local government that your property taxes haven’t been paid
    • If your mortgage servicer did not pay your taxes, you should send a copy of the bill along with a notice of error, which is a letter disputing the error, to your mortgage servicer.
    • If the servicer has failed to make timely tax and insurance payments from your escrow account on your behalf, you should contact your tax authority or insurance carrier as soon as possible. If you don’t or your servicer doesn’t pay the property taxes, a tax lien may be put on your property.
  • If you notice any of the changes above, the first thing you should do is contact your servicer to verify that these changes aren’t due to a mistake on their end.

If you have an escrow account and your mortgage servicer fails to pay your property taxes, or if you are facing imminent foreclosure or have been served with legal papers, you may need to consult an attorney or a housing counselor.

You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are approved by the Department of Housing and Urban Development (HUD). You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you have a problem with your mortgage, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

What should I do if I get a tax bill from the city or county saying that my mortgage servicer did not pay my taxes?

Contact your servicer immediately and send them a notice of error. You should also contact your tax authority as soon as possible.

If your mortgage servicer did not pay your property taxes and you have an escrow account for taxes, you should contact them immediately. Your servicer may be able to help you over the phone. However, putting the request in writing can give you more protections. To do that, send your mortgage servicer a copy of the bill along with a “notice of error” letter disputing the error.

You should also contact your tax authority as soon as possible and let them know you are working with your mortgage servicer to correct the issue. If your property taxes are not paid on time, a tax lien may be placed on your property.

If you have an escrow account and your mortgage servicer fails to pay your property taxes, you may want to consult an attorney or a housing counselor. You can use the CFPB's "Find a Counselor" tool to get a list of housing counseling agencies in your area that are approved by the Department of Housing and Urban Development (HUD). You can also receive advice from HUD-approved housing counseling agencies by calling the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney.

If you have a problem with your mortgage, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

Sources and further reading

The CFPB source passages are U.S. government work in the public domain. Fynoptic has selected, organized, and adapted the material for this guide, including corrections identified through the additional sources listed above. Sources accessed October 27, 2026. This use does not imply agency endorsement or affiliation.

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