An escrow balance is the total amount of money currently in an escrow account that is held for payments that a lender will make on behalf of the borrower. The escrow account is a type of financial account set up and managed by the lender, where part of the monthly mortgage payments is put into the account to cover expenses such as property taxes and insurance premiums. The escrow balance reflects payments made into the account minus any deductions made from the account for paying the insurance premiums and property taxes. The escrow balance is different from the principal balance, which refers to the amount of the home loan that is still outstanding. Lenders often base escrow payments on estimates of property taxes and other expenses, and if these expenses go up or are assessed for a higher value than anticipated, an escrow shortage may occur. An escrow shortage is when the escrow account may not be able to cover the full charges, and the borrower may be required to pay the difference.