Why Did My Mortgage Payment Change? Understanding Your Escrow Analysis

If you recently opened your mail to find that your monthly mortgage payment has changed, you aren't alone. This is the time of year when escrow analysis statements are sent out, and it is the most common reason for a shift in your monthly total.

Many homeowners mistakenly believe their lender has increased their interest rate. However, if you have a fixed-rate mortgage, your interest rate hasn’t moved. The change almost always comes down to two things: taxes and insurance.

What is an Escrow Account?

Think of your escrow account as a dedicated savings account managed by your lender. Each month, a portion of your mortgage payment is set aside in this account. When your property tax bill or homeowner’s insurance premium is due, your lender pays those bills on your behalf using the funds in that account.

An Escrow Analysis is a yearly "check-up" where we look at how much was paid out versus how much was collected to ensure there is enough money to cover next year’s bills.

Shortage vs. Surplus: What’s the Difference?

When your analysis is complete, your account will usually fall into one of two categories:
 

• Escrow Shortage: This happens if your property taxes or insurance premiums increased over the last year. Because the bills were higher than expected, your account is "short" the funds needed for the coming year. To fix this, your monthly payment increases to cover the gap and build the balance back up.
• Escrow Surplus: This is the good news! If your taxes or insurance went down, you might have extra money in your account. In this case, you’ll often receive a refund check for the overage, and your monthly payment may decrease slightly.

Simple Next Steps for Homeowners

If your payment increased and you want to lower it, here is what you can do:
 

1. Review Your Tax Assessment: Check with your local tax assessor’s office. If you believe your property has been overvalued, you may be able to appeal the assessment.
2. Shop Your Insurance: If your premiums have spiked, contact your insurance agent to see if you can find a more competitive rate for the same level of coverage.
3. Check Your Exemptions: Ensure you are receiving any tax exemptions you are entitled to, such as a Homestead Exemption.

Reviewing your statement carefully is the first step toward feeling confident in your home investment.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.