How to Calculate an Escrow Payment

Step-by-Step Guide

1. 1

   Step 1: Determine the amount of the previous year's property tax bill.

   First, you'll need to know the amount of property tax you can expect to pay this year.
   
   You can get this information from your agent or the current owner.
   
   If it is a new building, talk to the tax assessor's office to get an estimate of yearly taxes based on similar properties.
2. 2

   Step 2: Find out how much your insurance costs will be for the next year.

   Call several homeowners insurance companies and get quotes for yearly premiums.
   
   Consult with your lender to make sure you are getting the amount of insurance required. , This is how much money will be added to the monthly mortgage payment and deposited into an escrow account.
   
   If the insurance company requires an initial deposit, include that figure in your estimate.
   
   For example, imagine that you determine that you owe a total of $2,400 per year in property taxes and $1,200 in insurance premiums.
   
   Add these together to get a total of $3,600.
   
   Then, divide this number by 12 to get your monthly escrow payment, which would be $3,600/12, or $300. , Some lenders will not require an escrow account if the borrower is placing a 20 percent down payment on the property.Speak with your loan officer and see if the bank is willing to consider this option.
3. 3

   Step 3: Add the yearly taxes and insurance premium together and divide by 12.

4. 4

   Step 4: Consider making a larger down payment instead.

Detailed Guide

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