Do Escrow Accounts Earn Interest?

Escrow accounts earn interest only in states that legally require it. Federal law does not mandate interest payments on mortgage escrow accounts. 13 states require lenders to pay interest on escrow balances, including California, New York, Maine, and Wisconsin — but most U.S. homeowners receive $0 in escrow interest.

If you live in a state without an escrow interest law, your servicer keeps the balance without paying you — even if the account holds $3,000 or more throughout the year.

On a balance that averages $3,300 for 12 months, a 2.00% required rate (Maine in 2025) pays $66/year. A high-yield savings account at 4.00% on the same $3,300 would pay $132/year — which is why some homeowners seek escrow waiver once they have enough equity.

What Federal Law Says About Escrow Interest

RESPA (Regulation X) sets rules for escrow account management — cushions, analyses, surpluses, and shortages — but it does not require servicers to pay interest on escrow balances.

There is no federal minimum rate. Whether you earn interest depends entirely on your state’s laws and whether your loan servicer is covered by them.

For most homeowners in states like Texas, Florida, or Georgia, the answer is straightforward: no escrow interest, by law.

Which States Require Escrow Interest?

According to federal banking regulators, these 13 states require state-chartered institutions to pay specified interest on mortgage escrow accounts:

State	Requirement summary
California	Minimum interest on escrow (Cal. Civ. Code § 2954.8)
Connecticut	Required escrow interest (Conn. Gen. Stat. § 49-2a)
Maine	At least 50% of the 1-year T-Bill rate — 2.00% minimum in 2025
Maryland	Required escrow interest (Md. Comm. Law § 12-109)
Massachusetts	Required escrow interest (Mass. Gen. L. ch. 183, § 61)
Minnesota	Required escrow interest (Minn. Stat. § 47.20)
New Hampshire	Required escrow interest (N.H. Rev. Stat. § 383-B:3-303)
New York	Superintendent sets minimum rate quarterly (N.Y. Banking Law § 14-B)
Oregon	Required escrow interest (OR Rev. Stat. § 86.245)
Rhode Island	Rate equal to lender’s regular savings rate (R.I. Gen. Laws § 19-9-2)
Utah	Required escrow interest (Utah Code § 7-17-3)
Vermont	Required escrow interest (Vt. Stat. tit. 8, § 10404)
Wisconsin	Required escrow interest (Wis. Stat. § 138.051)

Maine example (2025): The minimum required rate is 2.00%, based on 50% of the 1-year Treasury Bill rate of 3.99% as of January 2, 2025. Interest is paid quarterly.

Rhode Island example: Interest must equal the lender’s regular savings account rate, paid annually on December 31.

If your state is not on this list, your servicer is not required to pay escrow interest under state law.

How Much Interest Can You Earn on an Escrow Account?

Be honest: it is small. Here is a realistic example for a Maine homeowner in 2025:

• Average escrow balance: $3,300
• Required rate: 2.00%
• Annual interest: $3,300 × 0.02 = $66
• Quarterly payment: about $16.50

Even in a required-interest state, you might earn $50 to $100 per year — not enough to meaningfully offset a $90/month escrow increase from rising taxes.

Multiply that gap: $90/month × 12 months = $1,080/year in higher escrow costs. Even Maine's full $66 interest credit leaves you $1,014 net worse off — which is why fighting tax and insurance increases matters more than escrow interest.

In non-required states, the same $3,300 balance earns $0.

How to Find Out If Your State Requires Escrow Interest

1. Check the list above. If your state is not listed, federal and state law likely do not require interest.

2. Read your annual escrow statement. Required-interest states often show an “interest credited” line. Look for amounts like $16.50 quarterly or $66 annual.

3. Call your servicer. Ask: “Does my state require escrow interest, and what rate are you paying?”

4. Review your state banking code. Search “[your state] mortgage escrow interest” for the current statute.

5. Confirm lender type. Some rules apply to state-chartered banks but not all national servicers. Ask whether your specific lender is covered.

See our article on how escrow works in a mortgage for how monthly deposits flow through the account.

Frequently Asked Questions

Do escrow accounts earn interest?

Only in the 13 states that require it by law. Federal RESPA rules do not mandate interest. Most homeowners receive $0.

Which states require lenders to pay interest on escrow accounts?

California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont, and Wisconsin.

How do I know if my escrow earns interest?

Check your annual escrow statement for an interest credit line, or ask your servicer directly. Maine residents should see quarterly credits at a minimum 2.00% rate in 2025.

Can I invest my escrow money myself?

Only if you cancel escrow entirely — which requires lender approval, typically 20%+ equity, and a clean payment history. You would then pay taxes and insurance yourself.

Why don't escrow accounts earn more interest?

Servicers hold funds for short periods before paying bills. Even in required states, rates are set by statute — Maine’s 2.00% in 2025 — not market investment returns.

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