Escrow Cushion

An escrow cushion is an additional amount of money held in an escrow account beyond the estimated costs of taxes, insurance, and other expenses. This extra amount acts as a safeguard to ensure there are sufficient funds in the account to cover any unexpected increases in these expenses. Lenders calculate the escrow cushion based on the estimated annual costs of taxes and insurance. They then add a buffer amount to this estimate to determine the total escrow payment required from the borrower.