June 13, 2019

The How, Why, and What of Escrow Account Analysis

Home Ownership

How is my escrow payment calculated?

We complete an analysis annually to verify if any adjustments are needed. That analysis starts with your current escrow balance and then projects what expenses will need to be paid out of the account for the next year. These expenses are typically property taxes and homeowners insurance. A cushion, as permitted by RESPA, is also factored into the analysis to ensure adequate funds for any unexpected changes to those bills. Your new escrow payment is then set to cover any shortage and adjusted to account for the projected expenses during the upcoming year. This new escrow amount is then part of your new monthly mortgage payment.

Why would my taxes and insurance increase?

While we may pay your escrow expenses as part of your mortgage, the bank has no direct control over the cost of these expenses.

Property taxes are typically handled by different departments within the county government. The county assessor would have the duty of determining the value and final assessment of the property. The county treasurer is then responsible for gathering the tax amount from the homeowners. If you have questions on your tax assessed value or the amount of the tax bill, you can contact your local county office for more information.

Homeowners insurance premium renewals can change for a variety of reasons. Specifics on what caused a premium change would need to be discussed with your insurance agent. This may also be a good time to look into a comprehensive review of your insurance needs. As an added customer benefit we can assist scheduling a consultation with one of our CorInsurance agents. During this time, they can complete a review of your current coverage and help you find the right balance of price, coverage, and service to fit your specific needs.

What are my options if I have an escrow shortage?

You have two options with an escrow shortage:

  1. Pay the full shortage. This option is helpful when trying to minimize the monthly payment amount for the next year. Your payment amount will decrease by the shortage, however your new payment may still go up, even if you pay the entire shortage, if your taxes or insurance increased from the prior analysis. This is because your minimum escrow payment is based on the projected total to be paid out for the incoming year.
  2. Make no payment and we will spread the shortage amount evenly across next year's payments. This option may be more feasible if you do not have the available funds to pay a larger shortage amount in full at one time.

Have a Question?

Contact our local mortgage servicing team with additional escrow account analysis questions!

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