If a check just showed up from your mortgage company, it’s almost certainly your own money coming back. The most common reason a mortgage company sends you a check is an escrow surplus: your servicer collected more for property taxes and insurance than the bills actually required. Other likely causes are a refund after you paid off or refinanced the loan, an insurance claim payout after property damage, a private mortgage insurance (PMI) reimbursement, or, in a handful of states, interest earned on your escrow balance. Each one has its own federal rules and, occasionally, a tax angle worth checking before you deposit the funds.
An Escrow Account Overage
This is the reason most homeowners see a check in the mail. Your servicer collects a slice of your property taxes and homeowner’s insurance with each monthly payment and holds it in an escrow account until the bills are due. Federal rules require the servicer to run an escrow analysis once a year, comparing what came in against what went out. If your tax assessment dropped, your insurance premium fell, or the servicer simply overestimated, the account ends the year with more than it needs.
The servicer can keep a cushion, but no more than one-sixth of the total yearly disbursements from the account. Anything above that is a surplus. If the surplus is $50 or more, the servicer must send you a refund check within 30 days of completing the analysis. If it’s under $50, the servicer can either refund it or apply it to next year’s escrow payments.1CFPB. 12 CFR 1024.17 – Escrow Accounts
An annual escrow statement should arrive with the check. It lists every tax and insurance payment made from the account over the past year and projects the coming year’s costs. Read it. A common surprise: you get a refund one year and then find your monthly payment has gone up the next. That happens when taxes or premiums jump after the analysis was done, so the servicer raises your monthly escrow collection to cover the higher bills and rebuild the cushion.
A Refund After You Paid Off the Loan
If you recently sold, refinanced, or paid off the mortgage, the servicer almost always ends up holding a little more of your money than it should. Payoff quotes are calculated through an anticipated closing date with a daily interest charge added. When the transaction closes even a day early, or when a scheduled monthly payment posts around the same time as the payoff wire, the servicer collects more than the true balance.
The servicer also still holds whatever was sitting in your escrow account. Federal rules require those escrow funds to be returned within 20 days, excluding weekends and federal holidays, after the loan is paid in full.2CFPB. 12 CFR 1024.34 – Timely Escrow Payments and Treatment of Escrow Account Balances Most servicers combine the escrow balance and the per-diem overpayment into a single check. Compare the amount to your final settlement statement. If something looks off, call the servicer while the account is still active on their end.
An Insurance Claim Disbursement
If you filed a homeowner’s insurance claim after storm damage, a fire, or a similar loss, the insurance company usually writes the check to both you and your mortgage servicer. Your policy contains a mortgagee clause giving the lender a financial interest in payouts, which is why its name is on the check. The lender wants the money to go into repairing the home.
You endorse the check and send it to your servicer. The servicer puts the funds into a loss draft account and releases them in stages as the work progresses. An initial portion may come out so you can hire a contractor, with follow-up releases after inspectors confirm the repairs are hitting milestones. The pace can be frustrating when you’re living in a damaged home, but investor guidelines dictate the schedule and the servicer has limited discretion.
A PMI Reimbursement
If you paid PMI on the loan and it was recently canceled or terminated, expect a small refund. The Homeowners Protection Act requires servicers to return any unearned PMI premiums within 45 days of the cancellation or termination taking effect.3Office of the Law Revision Counsel. 12 USC 4902 – Termination of Private Mortgage Insurance These checks usually cover just the unused portion of the last premium period, so the amount is modest.
The exception: if the servicer kept collecting PMI for months after it should have stopped, you could be owed considerably more. Pull your payment history and confirm the premiums ended when they were supposed to.
Interest Earned on Your Escrow Balance
About a dozen states require servicers to pay interest on money sitting in escrow, on the reasoning that the funds belong to you even though the servicer controls them. Rates vary. Some states peg the rate to a Treasury yield, others set a flat minimum. The amounts are usually small, arriving either as a check or as a credit on your annual escrow statement.
If the escrow interest paid to you during the year totals more than $10, the servicer is required to issue a Form 1099-INT, and the amount is taxable interest income on your federal return.4Internal Revenue Service. About Form 1099-INT, Interest Income
Do You Owe Tax on the Check
Usually, no. An escrow overage is just your own money coming back, a PMI refund is a return of unused premium, insurance proceeds used for repairs aren’t income, and a per-diem overpayment after payoff is your money too. Two situations are the exceptions.
The first is a property tax refund inside your escrow overage. If the surplus reflects a refund of property taxes that you deducted on a prior year’s return, the IRS tax benefit rule may require you to report some or all of that amount as income in the year you receive it.5Internal Revenue Service. Publication 530 (2025), Tax Information for Homeowners This only applies if you itemized in the year you originally paid the taxes. If you took the standard deduction, the refund isn’t taxable. Your escrow statement won’t flag this, so check your prior return or ask a tax preparer.
The second is escrow interest, taxable as ordinary income and reported on a 1099-INT above the $10 threshold.
Confirm the Check Is Real Before You Deposit It
Not every check that references your mortgage is legitimate. Scammers send official-looking mailers that include your address, name your actual lender, and enclose a check for some plausible amount. The trap is usually a phone number or website designed to collect your credit card details or personal information under the pretense of activating a home warranty or similar service.
A real escrow refund or PMI reimbursement comes from your servicer, references your loan number, and arrives with an escrow analysis or other explanatory paperwork. If you’re unsure, call the customer service number on your most recent mortgage statement, not the number printed on the mailer, and ask whether a refund was actually issued. If they confirm it, deposit the check. If they have no record, shred it.
If You Didn’t Cash the Check in Time
Refund checks don’t stay valid forever. Many servicers flag uncashed checks as unclaimed after roughly 180 days, especially on closed accounts, and eventually turn the funds over to your state’s unclaimed property program.6Investor.gov. Escheatment by Financial Institutions
If your loan is still open, call the servicer and ask for a replacement. Wait at least 30 days from the original issue date so the mail and processing window has passed. If the loan is already paid off and more than six months have gone by, the money may already be with the state, and you’d claim it through your state’s unclaimed property database instead. Either way it’s recoverable. It just gets slower the longer you wait.