To add property tax to your mortgage, you ask your servicer to set up an escrow account: you submit an authorization form with your property’s tax parcel number and most recent tax bill, the servicer runs an escrow analysis to verify the figures, and once it’s approved a portion of your annual tax bill is folded into each monthly mortgage payment. The whole process usually takes two to four weeks, and depending on when your next tax bill is due, you may owe an initial deposit to get the account funded on time.
Check Whether Escrow Is Already Required
Before you make the call, figure out where you stand. If you have an FHA loan, escrow is mandatory for the entire life of the loan and no waiver is allowed.1HUD. HUD Handbook – Chapter 2: Collections and Escrows If you’re not currently escrowing for taxes on an FHA mortgage, contact your servicer immediately — something has gone wrong.
On a conventional loan backed by Fannie Mae, servicers must deny an escrow waiver when the principal balance is 80 percent or more of the original appraised value.2Fannie Mae. Administering an Escrow Account and Paying Expenses In plain terms, if you put down less than 20 percent and haven’t paid the balance below that threshold, escrow is already required. VA-backed loans allow waivers but generally require at least 5 percent equity.
If you currently pay taxes yourself on a conventional or VA loan and want to switch to escrow, the rest is a voluntary request.
What to Gather Before You Call
The single most important piece of information is your property’s tax parcel number, sometimes labeled Tax ID, which identifies your specific lot in the county assessor’s records. It appears on your annual tax bill. Getting this wrong can mean the servicer’s payment gets credited to someone else’s account while your taxes go unpaid, which can lead to a tax lien.
You also want:
- The dollar amount from your most recent annual tax assessment. The servicer uses this to calculate your new monthly payment.
- Your mortgage loan account number.
- Bill amounts for each taxing jurisdiction if more than one applies (county, city, school district).
- A copy of your most recent tax statement, which most servicers ask for as proof of your current tax status.
Confirm that the property’s billing address on file with the tax office matches what your servicer has. A mismatched address or a transposed parcel number will delay the setup or send payments astray. Some local tax offices also require separate notification when a lender takes over payment responsibility, so ask your county or municipal assessor whether that step applies in your area.
Submitting the Request
Most servicers offer an escrow setup or voluntary authorization form through their online portal or mobile app. If you can’t find it, call customer service and ask them to email you a copy. The form asks you to enter your tax data, confirm the billing address as it appears in municipal records, and authorize the servicer to pay taxes on your behalf.
Submit through the secure document upload if you can — it’s the fastest route and generates an instant confirmation number worth saving. If you mail paper, send it to the mortgage servicing address on your monthly statement, not the payment address, which usually goes to a different lockbox.
After they receive your request, the servicer runs an escrow analysis. This is an accounting exercise: they verify your tax figures against public records, confirm there are no outstanding tax liens on the property, and calculate how much to collect each month going forward.3Consumer Financial Protection Bureau. 12 CFR Part 1024 (Regulation X) – 1024.17 Escrow Accounts Expect two to four weeks, though some servicers move faster.
When the analysis is complete, you’ll receive a formal notification confirming whether the account has been established and when the new payment structure begins. A successful setup also produces an initial escrow account statement itemizing the taxes (and any insurance) the servicer expects to pay over the next twelve months, with anticipated disbursement dates.3Consumer Financial Protection Bureau. 12 CFR Part 1024 (Regulation X) – 1024.17 Escrow Accounts If the request is denied, the letter will explain what went wrong, usually missing documentation or unverifiable tax data.
How Your New Monthly Payment Is Calculated
Your new payment will include your existing principal and interest plus an escrow portion. The servicer takes the total annual tax amount, divides it by twelve, and adds that to your bill. The figure is rarely a clean one-twelfth split, though, because federal law allows the servicer to keep a cushion.
Under Regulation X, the cushion cannot exceed one-sixth of the estimated total annual escrow disbursements, which works out to roughly two months’ worth of escrow payments.3Consumer Financial Protection Bureau. 12 CFR Part 1024 (Regulation X) – 1024.17 Escrow Accounts The buffer protects against unexpected tax increases or timing mismatches between when the servicer collects your payment and when the bill is due. Some states cap the cushion lower, so the reserve on your account may be smaller.
The Initial Deposit
If you’re adding escrow mid-year, the servicer will usually require an upfront deposit to bring the balance high enough to cover the next tax payment on time. This initial escrow deposit is calculated so the account’s projected lowest monthly balance hits zero, plus the allowable cushion.4Consumer Financial Protection Bureau. What Is an Initial Escrow Deposit? The closer you are to the next tax due date, the larger this catch-up payment tends to be. Ask whether you can pay it in installments or whether it’s due as a lump sum.
What Your Statement Will Show
Your updated mortgage statement will break out the exact amounts going toward principal, interest, and escrow. The first payment under the new structure usually starts in the next full billing cycle after approval. Your servicer will then run an escrow analysis at least once a year, and your monthly payment may adjust up or down based on changes to your tax bill or insurance premiums.
Adding Homeowners Insurance at the Same Time
While you’re setting up escrow for property taxes, consider whether to include your homeowners insurance premium in the same account. Many lenders prefer or require it. The servicer collects a monthly share of your annual premium alongside your taxes and pays the insurer directly when the bill comes due.
To set this up, contact your insurance agent and ask them to add a mortgagee clause to your policy. That clause names your lender or servicer as an interested party and directs the insurer to send all bills, notices, and policy documents to the servicer.5Fannie Mae. Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements Your servicer can provide the exact name and mailing address to use. Once the clause is in place and the servicer receives proof of coverage, they’ll fold the insurance premium into your monthly escrow calculation.
If you later switch insurance companies, your new insurer handles most of the transition by sending updated policy documents and billing to your servicer. Just make sure the mortgagee clause carries over to the new policy.
What Escrow Won’t Cover
Escrow typically does not cover supplemental or special assessment tax bills. These one-time charges show up after a reassessment triggered by a property sale, new construction, or ownership change. Even with a fully funded escrow account, your regular property taxes are covered but supplemental bills are usually your responsibility to pay directly. Confirm with your servicer, and plan to handle these out of pocket.
Removing Escrow Later
Adding escrow doesn’t have to be permanent. If you decide to go back to paying taxes directly, you can request a waiver, though approval depends on your loan type and financial standing.
FHA loans never allow waivers.1HUD. HUD Handbook – Chapter 2: Collections and Escrows For conventional loans, Fannie Mae requires that your loan balance be below 80 percent of the original appraised value, no delinquencies in the prior 12 months, no 60-day-or-longer delinquencies in the prior 24 months, and no history of a failed previous escrow waiver caused by missed tax or insurance payments.2Fannie Mae. Administering an Escrow Account and Paying Expenses Most servicers also impose a waiting period, typically one to five years after the loan closes or the escrow account was established, before they’ll consider removing it.
If a waiver is granted, you’ll receive any remaining escrow balance as a refund and become responsible for paying taxes and insurance directly. Miss a payment, and the servicer can reinstate mandatory escrow.