How escrow operates Escrow operates somewhat like a savings account, but customers must make monthly deposits as spelled out in their loan documents. We have a lot of people that choose to leave that escrow intact. The seller will often volunteer to show the most recent tax bill, or borrowers can get the information through the local tax-collection authority, usually an arm of the county government. As taxes and insurance policy bills change, so will escrow payments. Recalculated each year Most lenders run an analysis program each year to see whether the amount a borrower contributed over the course of the past 12 months was enough to cover all the tax and insurance bills due during that period.
Customers receive a transcript of the results showing what was paid out and what was collected.
Lenders typically require that an extra month or two of payments be maintained in the account as a reserve. They recoup that money the following year by boosting a person's required monthly deposit. We projected this much money would go in and this much money would go out. This is what actually came into the account and this is what actually went out. While these annual adjustments cause a mild stir in a homeowner's budget, escrow can occasionally shift dramatically.