What we verified in “Property taxes: paying through escrow or on your own”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. Under Regulation Z (12 CFR §1026.35(b)(1)), a lender may not make a higher-priced mortgage loan secured by a first lien on your principal dwelling unless an escrow account is set up before closing for property taxes and the insurance it requires, such as homeowners insurance or mortgage insurance.

   Sources 1 · 12 CFR §1026.35(b)(1): 'a creditor may not extend a higher-priced mortgage loan secured by a first lien on a consumer's principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor' · Checked October 31, 2026

2. Under Regulation Z (12 CFR §1026.35(a)(1)), a higher-priced mortgage loan is one secured by your principal dwelling whose annual percentage rate (APR) exceeds the average prime offer rate for a comparable loan by 1.5 percentage points or more, for a first lien within the Freddie Mac limit, or by 2.5 points or more, for a first lien above that limit.

   Sources 1 · 12 CFR §1026.35(a)(1): 'with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction'; '(i) By 1.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that does not exceed the limit'; 'eligible for purchase by Freddie Mac'; '(ii) By 2.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that exceeds the limit' · Checked October 31, 2026

3. Under Regulation Z (12 CFR §1026.35(b)(3)), the required escrow account on a higher-priced mortgage loan can be canceled only when the loan ends or when you request it no earlier than five years after closing; and even then only if your balance is less than 80% of the home's original value and you are not delinquent or in default.

   Sources 1 · 12 CFR §1026.35(b)(3)(i): 'may cancel an escrow account required in paragraph (b)(1) of this section only upon the earlier of: (A) Termination of the underlying debt obligation; or (B) Receipt no earlier than five years after consummation of a consumer's request'; (b)(3)(ii): '(A) The unpaid principal balance is less than 80 percent of the original value'; '(B) The consumer currently is not delinquent or in default' · Checked October 31, 2026

4. According to HUD Handbook 4000.1, on an FHA loan the servicer must require that your monthly payment include escrow funds for property taxes, special assessments, required homeowners insurance, flood insurance if applicable, FHA mortgage insurance and other charges that can take priority over the mortgage, excluding condo or HOA fees; it must pay bills as they come due, and if it pays late, it cannot pass the penalties on to you unless the late payment resulted from your error or omission and it tried to get the billing information.

   Sources 2 · Handbook 4000.1 (last revised August 12, 2026), III.A.1, '(C) Items to be Escrowed', p. 1157: 'The Mortgagee must require that the Borrower’s total Mortgage Payment includes escrow funds'; 'real estate taxes; special assessments'; 'Hazard Insurance required by the Mortgagee; Flood Insurance as applicable; FHA MIP'; 'other than Condominium or Homeowners’ Association (HOA) Fees'; '(A) Timeliness of Payments from Escrow Accounts', p. 1158: 'all disbursements made on behalf of the Borrower are made as bills become payable'; 'prohibited from passing on to the Borrower any penalties resulting from the late payments unless: the late payment was the result of the Borrower’s error or omission; and the Mortgagee attempted to obtain the billing information' · Checked October 31, 2026

5. According to Fannie Mae, first mortgages generally must have escrow for taxes, ground rent and property and flood insurance; Fannie Mae advocates escrow, particularly for borrowers with blemished credit or first-time homeowners; unless required by law, a lender may waive escrow on an individual loan, but the loan documents keep the standard escrow provision and the right to enforce it when appropriate; the lender must have a written policy, and a waiver cannot be based only on the loan-to-value ratio but also on whether you can handle the lump-sum payments of taxes and insurance.

   Sources 3 · Selling Guide B2-1.5-04, Escrow Accounts (04/01/2020): 'First mortgages generally must provide for the deposit of escrow funds to pay as they come due, including taxes, ground rents, premiums for property insurance, and premiums for flood insurance'; 'Fannie Mae advocates the establishment of an escrow account for the payment of taxes and insurance, particularly for borrowers with blemished credit histories or first-time homeowners'; 'Unless required by law, lenders may waive escrow account requirements for an individual first mortgage, provided the standard escrow provision remains in the mortgage loan legal documents'; 'the lender must retain Fannie Mae’s right to enforce the requirement'; 'Lenders must have a written policy'; 'not be based solely on the LTV ratio of a loan, but also on whether the borrower has the financial ability to handle the lump sum payments' · Checked October 31, 2026

6. Under Regulation Z (12 CFR §1026.38(l)(7)), your Closing Disclosure says whether you will have an escrow account (also called impound or trust); if you will, it shows what you will pay into escrow in the first year, costs not paid through escrow, the initial payment (cushion) and the monthly escrow payment; if you will not, it says why, that you must pay taxes and insurance directly, possibly in one or two large payments a year, the estimated first-year amount and any fee for not having escrow (escrow waiver fee).

   Sources 4 · 12 CFR §1026.38(l)(7)(i): 'a statement that an escrow account may also be called an impound or trust account'; '(A)'; 'Escrowed Property Costs over Year 1'; 'Non-Escrowed Property Costs over Year 1'; 'Initial Escrow Payment'; 'Monthly Escrow Payment'; '(B) A statement of whether the consumer will not have an escrow account, the reason why'; 'the consumer must pay all property costs, such as taxes and homeowner's insurance, directly'; 'possibly in one or two large payments, labeled “Property Costs over Year 1”'; 'The amount of any fee the creditor imposes on the consumer for not establishing an escrow account'; 'Escrow Waiver Fee' · Checked October 31, 2026

7. Under Regulation Z (12 CFR §1026.20(e)), if the escrow account on your first-lien loan will be canceled, the lender or servicer must give you an 'Escrow Closing Notice' with the closing date and reason, that without escrow you must pay taxes and insurance directly, possibly in one or two large payments a year, any fee for closing it, the consequences of not paying (such as adding amounts to the loan, adding escrow back or buying a more expensive insurance policy) and a phone number for questions; if you asked for it, it must reach you at least three business days before closure, and if you did not, at least 30 business days before.

   Sources 5 · 12 CFR §1026.20(e)(2)(i): 'under the heading “Escrow Closing Notice”'; 'the date on which the consumer will no longer have an escrow account'; 'the reason why the escrow account will be closed'; 'without an escrow account, the consumer must pay all property costs, such as taxes and homeowner's insurance, directly, possibly in one or two large payments a year'; 'Escrow Closing Fee'; (ii)(A): 'adding amounts to the loan balance, adding an escrow account to the loan, or purchasing a property insurance policy on the consumer's behalf that may be more expensive'; (B): 'a telephone number'; (e)(5)(i): 'no later than three business days before the closure'; (e)(5)(ii): 'no later than 30 business days before the closure' · Checked October 31, 2026

8. Under Regulation X (12 CFR §1024.17(k)(3)–(4)), if your taxing jurisdiction offers a choice of lump sum or installments, with no discount for paying in full and no extra charge for installments, the servicer must pay in installments; if there is a lump-sum discount or an installment charge, the servicer may pay in full; the CFPB encourages servicers to follow your preference; and you and the servicer may agree to a different method or date, as long as it is voluntary.

   Sources 6 · 12 CFR §1024.17(k)(3): 'If the taxing jurisdiction neither offers a discount for disbursements on a lump sum annual basis nor imposes any additional charge or fee for installment disbursements, the servicer must make disbursements on an installment basis'; 'may, at the servicer's discretion'; 'make lump sum annual disbursements in order to take advantage of the discount'; 'The Bureau encourages, but does not require, the servicer to follow the preference of the borrower'; (k)(4): 'a servicer and borrower may mutually agree, on an individual case basis, to a different disbursement basis'; 'The borrower must voluntarily agree' · Checked October 31, 2026

9. According to IRS Publication 530, if you pay property taxes through escrow, you may not be able to deduct everything you paid into escrow: you can deduct only the taxes the lender actually paid from escrow to the taxing authority, and your tax bill shows that amount.

   Sources 7 · Publication 530 (2025), 'Escrow accounts': 'You may not be able to deduct the total you pay into the escrow account. You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Your real estate tax bill will show this amount' · Checked October 31, 2026

10. According to the IRS, the VITA and TCE programs offer free basic tax return preparation to qualified individuals.

    Sources 8 · Free tax return preparation for qualifying taxpayers: 'offer free basic tax return preparation to qualified individuals' · Checked October 31, 2026

11. According to the CFPB, the counseling agencies in its search tool are approved by HUD and offer independent advice, often at little or no cost, on buying a home, renting, defaults, forbearances, foreclosures and credit; you search by ZIP code; and not every agency offers every service.

    Sources 9 · Find a Housing Counselor: 'approved by the U.S. Department of Housing and Urban Development (HUD)'; 'offer independent advice, often at little or no cost to you'; 'buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'Search by ZIP code'; 'Not every housing counselor offers all services' · Checked October 31, 2026