How to Calculate Escrow

Calculating escrow is simple

Whether you have have just purchased a home and are in the process of navigating the the fine-print on your mortgage statement in hopes of dissecting the many pieces that make up your monthly payment or just getting a handle on your finances, calculating escrows can be confusing at first glance. The truth is that your monthly mortgage payment is made up of more than just principal and interest. It also includes your insurance and tax payments, which are the two components of your escrow. No matter what your experience level is, you can calculate your escrow quite effectively by using some well-directed simple arithmetic.

Things You'll Need

• Property tax information
• Homeowner's insurance information

Instructions

1. Determine your annual tax payments from the previous year's property tax bill. This is the amount that was due prior to any penalties. Refer to the property tax bill of the previous owner if you did not own the property during the previous year.

2. Divide the property taxes paid from the previous step by 12 in order to calculate the monthly property taxes.

3. Determine your homeowner's insurance payment by referring to your insurance statement and
   then divide that annual payment by 12 months to calculate the monthly insurance payment.

4. Add together your monthly homeowner's insurance payment and your monthly property tax payment that you calculated in the previous steps to calculate your monthly escrow payment.

References

• Pickmymortgage.com: Escrows
• Mortgage Professor: How do I Figure Escrows?