Escrow Shortage or Overage: Why Your Payment Changed After Your Annual Analysis
Homeowners with an escrow account often notice their monthly mortgage payment changing even though their interest rate hasn't moved — a common cause is the annual escrow analysis, a routine review that compares what was collected against what was actually needed for taxes and insurance and adjusts the payment accordingly. What the annual escrow analysis actually checks Once a year, the loan servicer reviews the escrow account: how much was collected over the past year for property taxes and homeowners' insurance, how much was actually paid out for those bills, and what the account balance looks like relative to the required minimum reserve. Because tax and insurance costs can change year to year, the amount collected in the prior year's payment doesn't always match what's actually needed going forward. What an escrow shortage means A shortage occurs when the account balance falls below what's required, typically because property taxes or insurance premiu...