Land records · Parcel maps · October 7, 2026
Property Tax Escrow Account: How It Works
How a property tax escrow account works: your lender collects taxes monthly with your payment, pays the bills, and reviews the account each year.
Property tax escrow account is an account held by a mortgage servicer that collects money for property taxes, and often homeowners insurance, as part of the monthly mortgage payment. When tax bills come due, the servicer pays them from the account. The goal is to make sure taxes are paid so the lender’s collateral is not put at risk by a tax lien. Many loans require escrow, especially those with smaller down payments. Federal rules govern how much a servicer can collect and require an annual escrow analysis. This page is general land-records background, not legal advice.
How it works
- At closing, the buyer funds an initial escrow deposit.
- Each month, part of the payment goes into escrow.
- When bills come due, the servicer pays the tax collector.
- Annually, the servicer reviews the account and adjusts payments.
Escrow analysis
| Outcome | Result |
|---|---|
| Shortage | Payments rise or the owner pays a lump sum |
| Surplus | Refunds or lower payments, subject to rules |
| Balanced | Payments stay similar |
Federal rules under RESPA generally allow a cushion of up to one-sixth of annual escrow disbursements, roughly two months, and require refunds of surpluses over a small threshold.
Why payments change
Payments go up when property taxes rise after a revaluation, when exemptions drop off after a sale, or when insurance premiums increase. A first-year shortage is common when taxes are reassessed after purchase.
Supplemental bills
Some tax bills, such as supplemental tax bills, are sent directly to the owner rather than the servicer. Owners should check with the servicer before paying to avoid double payment.
Waiving escrow
Some borrowers with larger down payments can waive escrow, sometimes for a fee or a slightly higher rate. They then pay taxes directly and must budget for them.
Mistakes to watch for
- Servicer paying the wrong parcel.
- Missed payments causing penalties.
- Bills mailed to the owner instead of the servicer.
- Exemptions not applied, leading to overpayment.
Review your tax bill against the escrow statement each year. See how to read a property tax bill.
At closing
The initial escrow deposit and prorated taxes appear on the Closing Disclosure. The deposit is based on when the next bills are due.
When the loan is paid off
After payoff, the servicer refunds remaining escrow, and the owner becomes responsible for paying taxes directly. Update the mailing address with the tax collector so bills arrive.
Example
A homeowner’s annual taxes rise from $4,800 to $5,400. At the annual analysis, the servicer finds a $600 shortage. The owner can pay it in a lump sum or spread it over twelve months, and the monthly escrow amount increases to cover the higher future taxes.
Bottom line
A property tax escrow account lets a mortgage servicer collect taxes monthly and pay bills when due. Annual analyses adjust payments for shortages or surpluses. Check that the servicer pays the right parcel and amount, and handle direct-mailed bills carefully. Find county tax offices via the Platbookmapper map.
Property tax escrow account FAQ
What is a property tax escrow?
An account where your servicer collects and pays property taxes.
Why did my escrow payment go up?
Taxes or insurance likely increased.
Can I get rid of escrow?
Some loans allow waivers, sometimes for a fee.
Who pays supplemental bills?
Often the owner; check with the servicer.
What happens to escrow after payoff?
The balance is refunded and you pay taxes directly.