How Does Escrow Work in Illinois? Property Tax Guide

A mortgage escrow account is a holding account your loan servicer uses to pay your property taxes and homeowners insurance for you. Each month, a slice of your mortgage payment goes into the account, and the servicer pays the bills when they come due. In Illinois, property taxes are billed once a year, in arrears, and in two installments, so your escrow balance builds up between bills and then drops when a tax installment is paid.

How an Illinois mortgage escrow account works

Your servicer estimates your yearly property tax and insurance bills, divides the total by 12, and adds that amount to your principal-and-interest payment. The servicer pays the county tax bill and the insurance premium from the account when each is due. The CFPB explains that your tax and insurance costs can change from year to year, so your escrow payment, and your total monthly payment, will change with them.

Here's a simple example. The numbers are made up for illustration only:

• Estimated property tax: $4,800 a year
• Homeowners insurance: $1,200 a year
• Total: $6,000 a year, or $500 a month into escrow, plus any cushion (more on that below)

When you compare homes, look at the full payment with taxes and insurance, not only principal and interest. Our mortgage calculator lets you include both, and our guide to Illinois property taxes and your mortgage payment shows how county tax levels change the monthly number. Before you start touring, check how much house you can afford with taxes and insurance included.

When Illinois property taxes are due

Illinois bills property taxes in arrears. Tax year 2025 bills are due in 2026, and each county sets its own installment dates. Because your lender pays from escrow, those dates decide when your balance drops, so it helps to know them.

• Sangamon County (Springfield): For 2025 taxes payable in 2026, bills were mailed April 29, 2026. The first installment was due June 5, 2026 and the second September 4, 2026, according to the Sangamon County Treasurer.
• Cook County (Chicago): The Cook County Treasurer lists the first installment for tax year 2025 as due April 1, 2026 and the second as October 1, 2026. Cook's due dates shift from year to year (the 2024 second installment was due December 15, 2025), so always check the current date.

Cook County has one more feature that affects escrow. By law, the first installment is 55% of the prior year's total tax bill. The second installment carries any change from a new assessment, tax rate, or exemption. That's why a Cook County escrow payment can jump after the second bill. If you're shopping in Chicago, see our Chicago mortgage page; if you're near the capital, see Springfield.

Do you have to have an escrow account?

It depends on your loan. Here are the main cases:

• FHA loans: HUD's FHA handbook says the lender must collect a monthly amount to cover obligations such as hazard insurance, real estate taxes, and mortgage insurance premiums (see the "Projected Escrow" section). Read more on our FHA loans page.
• Higher-priced mortgage loans (HPMLs): Federal rules require an escrow account for at least five years. An HPML is a first-lien loan whose APR is 1.5 or more percentage points above the average prime offer rate (2.5 points for jumbo loans, 3.5 points for subordinate liens). After five years you may ask to cancel, but only if your balance is under 80% of the home's original value and you are not delinquent. Most prime loans are not HPMLs. Details are in 12 CFR 1026.35.
• Conventional loans: Fannie Mae's guide says first mortgages generally must provide for escrow deposits. Lenders may waive escrow under a written policy that can't rest on loan-to-value alone, and the lender must confirm you can handle lump-sum tax and insurance bills. Whether a waiver is available, and at what cost, is up to your lender. See Fannie Mae's escrow rules.

Your Loan Estimate and Closing Disclosure show the estimated escrow amounts for your loan. Ask your loan officer which rule applies to you before you decide.

Escrow cushions, annual reviews, shortages and refunds

Under RESPA rules (12 CFR 1024.17), your servicer:

• May hold a cushion of no more than one-sixth of the estimated total annual disbursements, which is about two months of payments. In our example, that's up to $1,000.
• Must review the account every year and send you an annual escrow statement.
• Must refund a surplus of $50 or more within 30 days of the analysis if you are current on your payments.
• Can spread a shortage over at least 12 months in equal payments if the shortage is one month's escrow payment or more. For smaller shortages, the servicer can also ask for repayment within 30 days.

Common reasons for a shortage are a higher tax bill, a higher insurance premium, or a reassessment. If the new payment strains your budget, call your servicer, ask for the analysis, and ask how the shortage can be spread.

Illinois protections: payment notices and the wrong-PIN problem

Illinois's Mortgage Escrow Account Act adds a notice rule. Under 765 ILCS 910/15, when a mortgage lender pays your property tax from escrow, it must give you written notice of the payment date, the amount, and the property's index number or other identifier within 45 business days after the payment. A lender that tells you at least once a year how to look up that information by phone, internet or other means is treated as compliant.

Paying through escrow does not remove your own responsibility to check. The Cook County Treasurer warns that servicers sometimes fail to pay, or pay the wrong Property Index Number (PIN), which happens to more than 2,500 taxpayers each year in Cook County. It recommends checking the county's payment status after each installment is due. It also says that if you are current on your escrow payments and the company pays late, pays the wrong amount, or pays on the wrong PIN, the lender must cover any interest or fees. If taxes still go unpaid, they remain due, and delinquent taxes can eventually be offered at a tax sale.

Homestead exemptions that can lower your tax bill

Exemptions reduce the equalized assessed value (EAV) your tax rate is applied to, which can lower the tax bill your escrow has to cover. The Illinois Department of Revenue lists these:

• General Homestead Exemption: for owner-occupied primary residences, up to $10,000 off EAV in Cook County, $8,000 in counties contiguous to Cook, and $6,000 in all other counties, including Sangamon.
• Senior Citizens Homestead Exemption: for owners 65 and older, up to $8,000 off EAV in Cook and contiguous counties and $5,000 elsewhere. Cook County requires an application every year.
• Homestead Improvement Exemption: for new improvements, up to $75,000 in fair cash value ($25,000 in assessed value) for four years.

Statewide, assessed value is generally one-third of fair cash value (33 1/3%). Cook County uses 10% of market value for assessed valuation and applies exemptions on the second installment bill. Ask the county assessor which exemptions you need to file for after you buy.

Escrow or pay taxes yourself?

An escrow account spreads the tax and insurance costs across the year and lowers the risk of a missed bill. The tradeoff is a higher monthly payment and a payment that can change after each annual review. If you don't have escrow, you must save for large tax and insurance bills and pay them on time. The CFPB notes that unpaid property taxes can bring fines, penalties, or a tax lien.

Who this applies to and next steps

This guide is for Illinois buyers and homeowners with a mortgage, especially first-time buyers deciding how much monthly payment they can carry. If you are buying, our first-time home buyer page and Illinois down payment programs guide cover the programs available. Closing is when your escrow account is first funded, so read our guide on how long it takes to close on a house in Illinois as well.

Want to see your estimated payment with taxes and insurance? Call a licensed Illinois loan officer at [(217) 931-8000](tel:+12179318000) or contact us online. This article is for general information only and is not legal or tax advice. Illinois Mortgage Co. · NMLS #2770476 · Equal Housing Opportunity Lender. This is not a commitment to lend.