Mortgages & Financing
How do escrow and property taxes work in my monthly payment?
By Steve Lockhart
The short answer
Escrow is the savings account built into your mortgage that pays your property taxes and insurance for you. Each month you pay a slice toward those bills along with your loan payment, the lender holds the money, and when the county tax bill or the insurance premium comes due, escrow pays it.
Full answer
Escrow is the savings account built into your mortgage that pays your property taxes and insurance for you. Each month you pay a slice toward those bills along with your loan payment, the lender holds the money, and when the county tax bill or the insurance premium comes due, escrow pays it. That is why the monthly payment is higher than the bare principal and interest number: part of the total is simply money set aside for bills you would owe anyway. Nevada property tax rates are lower than the national average, which helps, but the share is still real. Once a year the lender runs an escrow analysis, compares what was collected to what was paid, and adjusts the payment so the account stays balanced, which is why the total can drift a little each year. We bake the full escrow line into the budget from day one, so the payment you plan out is the payment you pay.
Go a little deeper
Frequently asked
Questions people often follow up on
Is the escrow money mine?
Yes, it is your tax and insurance fund, held and paid by the lender on your behalf. If you pay off the loan or refinance and the account has a surplus, the extra is returned to you. It is not a fee the lender keeps, it is your money working on its own schedule.
Why does my payment go up when the rate stays the same?
The annual escrow analysis corrects the account to match the real tax and insurance bills, and a reassessment or a bigger premium raises that slice. The notice explains the change line by line. We budget with the full number so the yearly adjustment is expected, not a shock.
Can I waive escrow and pay the bills myself?
Some lenders allow a waiver for a fee or with a larger down payment, depending on the loan type. If you are disciplined it can work, but the discipline is real, because an uninsured home is a breach of the loan. For most buyers the escrow is the responsible guardrail, and we weigh the trade together.
The Lockhart Method
The Lockhart Method
Your Home | My Strategy | Proven Results
My strategy: keep the taxes, the insurance, and any HOA dues line in the price from the first calculator, and treat the annual escrow review as a planned step each fall. A payment that accounts for escrow from day one is the one that holds up in year five.
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