A T&I payment is the portion of your monthly mortgage bill that covers property taxes and homeowners insurance — separate from the principal and interest you owe on the loan itself.
When you have a mortgage with an escrow account (also called an impound account), your lender collects money each month for taxes and insurance along with your regular mortgage payment. The lender holds this money in escrow and pays your tax bill and insurance premiums on your behalf when they come due. This is different from paying taxes and insurance directly to your county and insurance company yourself.
Not all mortgages require an escrow account. If you put down 20 percent or more, you may have the option to pay taxes and insurance separately. If you put down less than 20 percent, your lender typically requires escrow as a condition of the loan. Either way, understanding how T&I payments work helps you budget accurately and know what to expect on your monthly statement.
Key Takeaways
- T&I stands for taxes and insurance, the two costs your lender collects each month in addition to principal and interest.
- Your lender estimates your annual tax and insurance costs, divides by 12, and adds that amount to your monthly payment.
- Escrow accounts are required for loans with less than 20 percent down and optional for those with more.
- Your T&I payment can increase or decrease each year based on changes to your property tax assessment or insurance premiums.
- You can request an escrow analysis from your lender if you believe your T&I payment is incorrect.
How your lender calculates the T&I portion
Your lender estimates what you will owe in property taxes and homeowners insurance over the next year, adds those two figures together, and divides by 12. That monthly amount gets added to your principal and interest payment. For example, if your estimated annual taxes are $2,400 and your annual insurance premium is $1,200, your lender adds $300 per month to your mortgage payment.
These are estimates, not exact amounts. Your lender bases them on the previous year's tax bill, the assessed value of your home, your insurance company's quote, and the coverage level you chose. When the actual bills arrive, the amount may be higher or lower than what was estimated. If there is a shortage (you owe more than was collected), your lender may raise your monthly payment or ask you to pay the difference. If there is a surplus (you overpaid), you may receive a refund or a credit toward future payments.
Why lenders require escrow accounts
Lenders require escrow for loans with less than 20 percent down because they want to ensure taxes and insurance stay current. If you stopped paying property taxes, the county could place a lien on the home or foreclose. If your homeowners insurance lapsed, the home would be uninsured, and the lender's collateral would be at risk. By collecting the money themselves and paying the bills, lenders protect their investment in your property.
Escrow also protects you from the shock of a large bill arriving unexpectedly. Instead of saving $2,400 for taxes all year and writing one check in December, you pay $200 per month as part of your mortgage. The money is already set aside, so you are less likely to miss a payment.
When your T&I payment changes
Your T&I payment is not fixed for the life of your loan. Property tax assessments can increase if your home value rises or your local tax rate changes. Insurance premiums can increase if you file claims, if your insurer raises rates, or if you add coverage. Once a year, usually around the anniversary of your loan closing, your lender performs an escrow analysis to see whether the monthly amount needs to adjust.
If your property taxes jump significantly — for example, after a reassessment — your T&I payment may increase by $50 or $100 per month or more. If your insurance company raises premiums, the same happens. You will receive a notice from your lender explaining the change and showing the new payment amount. This is normal and does not mean something is wrong with your loan.
The difference between T&I and PITI
PITI stands for principal, interest, taxes, and insurance — the four components of a full mortgage payment. T&I is just the taxes and insurance portion. When you see your mortgage statement, it usually breaks down the payment into these parts so you can see how much of your money goes toward each category.
Understanding this breakdown matters because it shows you how much of your payment actually reduces your loan balance. If your payment is $1,500 and $300 goes to T&I, only $1,200 goes toward principal and interest. The T&I portion does not build equity in your home; it covers costs that would exist whether you owned the home outright or had a mortgage.
How to review your escrow account
You have the right to request an escrow analysis from your lender at any time, though lenders are required to perform one annually. If you believe your T&I payment is too high or too low, contact your loan servicer and ask for a statement showing the escrow account balance, the estimated taxes and insurance, and the monthly payment calculation.
Look for errors in the property tax estimate — sometimes lenders use outdated assessed values. Check that your insurance premium is current; if you switched insurers or reduced coverage, tell your lender so they can recalculate. If the analysis shows a large surplus, you can ask whether the lender will refund the overage or credit it toward future payments. If there is a shortage, ask whether you can pay it over time rather than in one lump sum.
Escrow accounts and refinancing
When you refinance your mortgage, the new lender will set up a new escrow account based on current tax and insurance estimates. Your old lender must return any escrow balance to you within a set time frame — usually 20 to 30 days after the loan closes. This refund is separate from your new loan and does not reduce what you owe.
Some borrowers use the escrow refund to cover closing costs on the refinance or to pay down the new loan balance. Others use it to cover the gap between when the old escrow closes and the new one begins collecting. Plan for this money in your refinance timeline so you are not caught short.
Frequently Asked Questions
Can I opt out of escrow if I have less than 20 percent down?
No. Lenders require escrow for loans with less than 20 percent down as a condition of the mortgage. Once you reach 20 percent equity in your home, you may be able to request that escrow be removed, though the lender can decline. Check your loan documents or call your servicer to learn your lender's policy.
What happens if my property taxes or insurance go up a lot?
Your lender will recalculate your T&I payment at the next annual escrow analysis. If the increase is large, your monthly payment will rise. You will receive written notice of the change before it takes effect. If the increase is a surprise, contact your lender to discuss whether you can spread the shortage over several months instead of raising the payment all at once.
Can I pay my taxes and insurance myself instead of through escrow?
If you have more than 20 percent equity and your lender allows it, yes. You would request escrow removal and then pay your property tax bill and insurance premium directly to the county and insurance company. Your mortgage payment would decrease by the T&I amount, but you become responsible for making sure both bills are paid on time.
Why did my escrow account have a big surplus?
Your lender overestimated your taxes or insurance costs. This can happen if your property was reassessed lower than expected, your insurance company lowered your premium, or you made changes to your coverage that your lender did not account for right away. The surplus belongs to you; ask your lender whether they will refund it or apply it to future payments.
Does my T&I payment build equity in my home?
No. T&I payments cover costs that exist separately from your loan. Only the principal portion of your payment reduces what you owe and builds equity. The interest, taxes, and insurance are expenses, not investments in ownership.