Self-Escrow Calculator

Paying your own property tax and insurance means holding the money yourself until the bills come due. Enter each bill and when it is next due, and this works out what to transfer each month, whether the account needs a top-up now to get through the next twelve months, the lowest point the balance will reach, and what the money could earn while it waits.

Why the monthly amount is not the whole answer

The monthly figure is simple: add up a year of bills and divide by twelve. Over a full year that is exactly what goes out, so it keeps the account level from one year to the next.

The dates are what complicate it. Say a $2,490 tax installment is due three months from now and the monthly transfer is $790. Three transfers make $2,370 — the right amount for the year, but not enough by then. No monthly amount can reach back to a bill that arrives before the transfers have built up; only money already in the account can. That gap is the top-up, and mortgage servicers call it a shortage when it shows up on an escrow statement.

If a lump sum is not practical, the calculator also shows a higher monthly amount that gets there with no top-up. It collects more than the bills need over the year, so it can come back down once the account has built up. The exception is a bill due before the first transfer lands, which has to be covered from what is already there.

The buffer

The buffer is the least the account should hold after any bill is paid. It covers the ordinary surprises: a tax bill that went up after a reassessment, an insurance renewal higher than last year, a transfer that posts a day late.

When a mortgage servicer runs escrow, federal rules let it keep a cushion of up to one-sixth of the year's escrowed bills — about two months' worth. Escrowing yourself, the size of the cushion is your call. A few hundred dollars is a common starting point; if your bills tend to change from year to year, more is reasonable.

How the dates are handled

When a bill and a transfer fall on the same day, the calculator assumes the bill clears first. A transfer scheduled for the 1st can post after a payment made on the 1st, and the buffer should hold whichever way round it happens.

A due date that has already passed rolls forward to its next occurrence, and a bill due on the 31st lands on the last day of shorter months. Enter the amount each time: property tax paid in two installments of $2,490 goes in as 2,490, twice a year.

What goes in the account

Anything large that arrives on a schedule rather than every month:

Property tax, often billed once or twice a year
Homeowners insurance, when the premium is paid annually
Car insurance paid in full every six or twelve months
Life insurance on an annual premium
Other yearly payments — HOA dues billed annually, vehicle registration, a flood policy

It is the same idea as the envelope in the monthly budget worksheet: money set aside each month for a bill that is not due yet, so that when it arrives it is already covered.

What it earns, and what it asks of you

An escrow account held by a mortgage servicer usually earns nothing. A handful of states require servicers to pay some interest, typically at a low rate. The same money in a high-yield savings account earns interest on whatever balance it carries through the year, and the calculator estimates that from the balance day by day. The interest is never counted toward the buffer, so the plan works without it. Interest earned is taxable income.

A servicer holds it

Usually earns nothing, and only a handful of states require otherwise
The bills are paid for you, on time, without your involvement
The cushion is capped by federal rule at about two months' worth

You hold it

Earns whatever your savings account pays, and that interest is taxable
Every due date is yours to meet
The cushion is whatever size you decide it should be

The trade is that the bills become your job.

A missed property tax payment can bring penalties and interest, and a lapsed insurance policy can leave the home uninsured. Calendar reminders a couple of weeks ahead of each due date, and keeping the escrow money in its own account, go a long way.

Can you escrow yourself?

That depends on the loan. FHA and USDA loans require an escrow account, and VA loans typically have one. Conventional loans with less than 20% down usually require it as well. Where a lender does allow escrow to be waived, it may charge a one-time fee or a slightly higher rate. Your servicer can tell you whether a waiver is available on your loan and what it would cost. If you own your home outright, there is no servicer involved, and this is simply how the bills get paid.

What this doesn't do

It projects twelve months using the amounts you enter, so it assumes those bills stay the same. Property taxes and premiums rarely do. Revisit it when a new bill arrives, and raise the monthly amount when one goes up. It also treats the savings rate as fixed for the year, which variable rates are not.

If you are weighing whether to take escrow off your mortgage at all, that is worth talking through alongside the rest of the budget, and it is the kind of question we work through in sessions.