Perennial Funding > Blog > Mortgages > Understanding Real Estate Taxes and Funds in Escrow

Understanding Real Estate Taxes and Funds in Escrow

Mortgage lenders, real estate firms and title companies provide escrow accounts to ensure that funds are allocated in advance for a variety of items.

Perennial Funding provides helpful tips for borrowers who would like a greater understanding of escrowed accounts for real estate transactions.

Special Escrow Accounts

Designed to safeguard the interests of various parties, a special escrow account may be used to secure an earnest money deposit, a down payment on a real estate sales contract or to hold money toward closing costs.

Special escrow accounts are also used in real estate transactions to withhold the distribution of proceeds until specific property repairs are completed.

What is the Purpose a Mortgage Escrow Account?

In a situation where a borrower makes a down payment that is less than 20 percent of the purchase price of a home or when a refinancing transaction will result in a new loan that exceeds 80 percent of the property’s fair market value, most lenders will require the establishment of an escrow account.

The escrow account is used to partition a portion of a borrower’s monthly mortgage payment to fulfill ongoing expenses to other entities. Generally, a monthly mortgage payment will consist of principal, interest, taxes and insurance.

For a traditional home loan, the principal and interest payments are due each month to a mortgage lender. When an escrow account is required, real estate taxes are also collected each month for distribution to local government entities, and insurance payments are collected to cover the costs of a homeowners insurance premium.

When an escrow account is set up, a mortgage lender will usually collect one-twelfth (1/12th) of an item’s annual cost each month. In some cases, a mortgage lender may require an escrow reserve or a two-month cushion for certain expenses.

For example, if a borrower were required to pay $1,200 per year in property taxes and $300 per year for homeowners insurance, a lender would collect $100 per month toward the annual cost for property taxes and $25 per month for homeowners insurance.

Therefore, if $1,200 is the monthly payment that is needed to cover the principal and interest for a home loan, a total payment of $1,325 would be due each month to fund an escrow account for taxes and insurance, when using the aforementioned example.

Generally, the funds for escrowed items are sent to the respective entities on an annual or a semi-annual basis.

We have included the following charts for escrows below:


Due Date Annually
1-Nov 12 months

Pennsylvania (Except Philadelphia)

Due Dates Tax type-annually
1-Mar County/City/Local
1-Aug School

Pennsylvnaia (Philadelphia Only)

Due Date Annually
1-Feb 12 months


Due Dates Semi-annually
5-Jun 6 months
5-Dec 6 months


Due Dates Semi-annually
30-Sep 6 months
31-Dec 6 months

New Jersey

Due Dates Semi-annually
1-Feb 3 months
1-May 3 months
1-Aug 3 months
1-Nov 3 months

Contact Perennial Funding at (888) 826-4856 for additional information about the collection of escrowed items or to discuss home buying strategies with one of our licensed loan specialists.

Request a free consultation!

NMLS #247954
Click here for the Perennial Funding NMLS access page.

Perennial Funding LLC, 161 Washington St. Suite 950, Conshohocken, PA 19428

Loan programs are subject to credit approval. Other terms, conditions, restrictions and fees may apply. All of the information on this website is published in good faith and for general information purposes only. Perennial Funding does not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information on our website is strictly at your own risk and we will not be liable for any losses and damages in connection with the use of our website. The content in this website should not be construed as a mortgage loan commitment. From our website, you can visit other websites by following hyperlinks to these sites. While we strive to provide only links to useful and ethical websites, we have no control over the content and nature of these sites and the links to other websites do not imply a recommendation for all of the content found on these sites. Please be aware that when you leave our website, other sites may have different privacy policies and terms, which are beyond our control. Thank you for visiting Perennial Funding's website.
*By refinancing your existing mortgage your total finance charges may be higher over the life of the loan.

© Copyright 2015 Perennial Funding LLC All Rights Reserved.