Alloy Mortgage

Buyer guide

Escrow accounts, explained simply

The part of your payment nobody teaches you: where it goes, why it changes, and how to stay ahead of it every year you own the home.

A homeowner at her kitchen table with coffee, opening a letter from her mortgage servicer

An escrow account holds part of each mortgage payment until your property tax and homeowner's insurance bills are due. Your servicer then pays those bills for you.

  • Your servicer collects a slice of your taxes and insurance with every monthly payment
  • When those bills come due, the servicer pays them from the account, not from your checking
  • Taxes and insurance prices move over time, so the escrow slice moves with them

Why taxes and insurance move, even with a fixed rate

A fixed rate locks principal and interest. It does not lock property taxes or insurance premiums.

  • Property taxes: Colorado counties reassess values every two years and set mill levies yearly.
  • Homeowner's insurance: Your carrier can change the premium at each renewal.
  • Your payment: The escrow portion adjusts when either bill changes.

How your lender plans for this at closing

Your lender builds a starting balance so the first bills can be paid on time.

  • Insurance: The first year is commonly paid at closing.
  • Property taxes: Several months may be deposited into escrow.
  • Cushion: Federal rules allow up to two months of escrow payments as a buffer.
  • Closing documents: Look for Homeowner's Insurance and Initial Escrow Payment at Closing.

Finding your escrow account on your monthly statement

Your monthly statement separates the loan payment from the money being saved for taxes and insurance.

  • Principal: Reduces the amount you owe.
  • Interest: The cost of borrowing.
  • Escrow: Money collected for property taxes and homeowner's insurance.
  • Year-to-date activity: Deposits collected and bills paid from the account.

What the annual escrow analysis is telling you

Once a year, your servicer compares what it collected with what taxes and insurance actually cost. Then it estimates the next 12 months.

  • Shortage: The account collected less than the bills required.
  • Shortage options: Pay it at once or spread it across the next 12 months.
  • Surplus: Extra funds above the allowed threshold may be refunded.
  • New payment: The analysis shows when the updated amount begins.

How to monitor your escrow over the years you own the home

A 15-minute review once or twice a year can catch surprises before they reach your payment.

  • Each spring: Compare the county assessment notice with the tax estimate in escrow.
  • At insurance renewal: Review the new premium and shop it every year or two.
  • After switching insurance: Send the new declarations page to your servicer.
  • After a refinance: Watch for duplicate tax payments and your old escrow refund.
  • When something looks wrong: Ask the servicer for a complete escrow breakdown.

What buyers ask about escrow

The short version of each answer. If yours is not here, call or text 720-386-4071 and ask.

Questions about your own numbers?

Call or text 720-386-4071, or start the application and we will follow up the same day. The conversation is free, and the math is yours to keep.

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