Why Did My Mortgage Escrow Increase?

Homeowners lookiing at their escrow increase letterAs a homeowner, you may experience an unexpected hike in your mortgage escrow or escrow payment, which can be worrisome. Knowing why your escrow account balance has increased and considering the options available to tackle the situation is paramount. 

In this article, we'll discuss various factors that might have caused an increase in your mortgage escrow and provide helpful tips to help you deal with it. Furthermore, we'll address common queries associated with mortgage escrows, including property tax payments, real estate tax, annual escrow, monthly payment amount, and how an increase in your escrow payment will impact your principal and interest payment. So, let's dive in and learn how an increase in your mortgage escrow can be resolved!

Factors That Affect Your Mortgage Escrow Account

When you purchase a home, you must set up an escrow account as part of your mortgage. An escrow account is a holding place for funds used to pay homeownership expenses, such as property taxes and insurance premiums. However, several factors can affect how much your mortgage escrow account requires.

One of the most significant factors that can impact your mortgage escrow account is changes in property taxes. If local tax rates increase, your monthly payments into the escrow account will also increase. Similarly, if tax rates decrease, you may see a reduced amount required for your monthly income.

Changes in insurance premiums can also affect your mortgage escrow account. Homeowners' insurance protects against damage or loss caused by natural disasters or other unforeseen events.

How Your Property Taxes Affect Your Escrow

When purchasing a home, property taxes are an essential factor to consider. They not only determine the amount you owe each year, but they also impact your monthly mortgage payments and your escrow account. Your escrow account pays for expenses such as property taxes and insurance premiums. Understanding how property taxes affect your escrow can help you manage your finances more efficiently.

Firstly, if you mortgage your home, you may have an escrow account with your lender. This means that a portion of each monthly mortgage payment covers expenses like property taxes and insurance premiums. The amount of money that goes into the escrow account is based on estimates of the upcoming costs for these expenses.

How Your Homeowners Insurance Affects Your Escrow

Homeowners insurance is an essential investment for any homeowner, and it not only protects your home from unexpected damages and provides you with peace of mind. However, many homeowners are unaware of how their insurance policies can affect their escrow accounts.

Your escrow account is a savings account where funds are collected and held to pay for property taxes and homeowners insurance. The amount you must pay into the escrow account is calculated based on your homeowner's insurance policy. If your policy changes, it can lead to fluctuations in the amount you need to pay into the account each month.

For instance, switching to a more expensive policy or renewing your existing one at a higher rate will increase the monthly payments required for your escrow account. Conversely, if you choose a less expensive policy or receive a discount on your current one, your costs will decrease accordingly.

Common Mistakes to Avoid with Your Mortgage Escrow

When managing your mortgage, escrow accounts are an essential component. This account is designed to hold funds for property taxes and homeowners insurance, which are paid annually. While an escrow account may appear straightforward, there are common mistakes that borrowers should avoid.

One mistake borrowers make is failing to understand the terms of their mortgage agreement. Lenders have different rules concerning the amount required in escrow and when payments are due. Before agreeing to a mortgage, review the terms carefully and ask questions if necessary. Another mistake is not monitoring your account regularly; this can lead to missed or late payments and even foreclosure.

Failing to update your insurance policy or tax assessments is another error that can be costly. Your lender will adjust your monthly payment based on changes in these costs, so you must keep them current.

Tips for Managing Your Mortgage Escrow

Managing your mortgage escrow can be daunting, especially if you're a new homeowner. Escrow accounts are designed to help you budget for property taxes and insurance premiums by setting aside funds each month. However, it's essential to understand how your escrow works and how to manage it properly.

Firstly, monitor your monthly mortgage statement to ensure the correct amount is allocated toward your escrow account. If there are any discrepancies or errors, contact your mortgage servicer immediately. Additionally, review any notification letters that outline changes in taxes or insurance premiums within the year, as these could impact the monthly amount being set aside.

Secondly, always pay attention to deadlines for submitting property tax or insurance premium payments from your escrow account. Missing deadlines may result in late fees or even cancellation of coverage which could be detrimental should unexpected damage occur during such periods.


It is vital to understand the reason behind the increase in your mortgage escrow and its impact on your monthly payment and savings. If you're unsure why your escrow has increased, it's best to contact your lender for more information and dispute any inaccurate fees.

Reviewing your loan documents can also help you identify the reason behind any changes. It's essential to keep track of elements such as the escrow balance, monthly escrow payment, and the type of escrow, especially if you have a fixed-rate mortgage. Engaging in an escrow analysis can also provide valuable insights into how your mortgage is performing and if reassessment is needed to make it ideal for your needs.