Escrow Surprise: When Your California Mortgage Doesn’t Cover Property Taxes

Your California mortgage does not always include an escrow account for property tax. Whether or not you have an escrow account depends on several factors, including:

  • Your down payment: Lenders typically require escrow accounts for borrowers with down payments below 20% of the purchase price. This helps ensure the borrower has enough money to cover future property taxes and insurance premiums.
  • Loan type: Some loan types, like Federal Housing Administration (FHA) loans and Veterans Affairs (VA) loans, may require escrow accounts regardless of the down payment.
  • Lender policy: Ultimately, the decision of whether or not to require an escrow account rests with the lender. Some lenders may allow borrowers with down payments above 20% to choose whether or not to have an escrow account.

Here are some additional points to consider:

  • If you do have an escrow account, your monthly mortgage payment will include a portion of your estimated property tax and insurance premiums. The lender will then use the money in the escrow account to pay your bills when they are due.
  • If you don’t have an escrow account, you will be responsible for paying your property taxes and insurance premiums directly to the taxing authority and insurance company. You will need to be sure to budget for these expenses and make sure you pay them on time to avoid penalties.

There are both pros and cons to having an escrow account.


  • It can help you avoid late fees and penalties by ensuring your bills are paid on time.
  • It can simplify your monthly budget by making all of your housing expenses in one payment.


  • You may pay more in interest over the life of your loan because the lender is holding onto your money in the escrow account.
  • You may not have as much control over how your money is invested.

Ultimately, the decision of whether or not to have an escrow account is a personal one. Weigh the pros and cons carefully and talk to your lender about what is best for your situation.

Here are some resources that you may find helpful:

If you don’t have your property taxes taken into escrow with each mortgage payment, there are some dates you will want to be familiar with.  Click here to download our California property tax calendar.