Question 1

Why did my mortgage payment go up even though my rate didn't change?

Accepted Answer

The most common reason is an escrow shortage. If your property taxes or insurance premiums increased, your lender's annual escrow analysis will adjust your monthly payment upward to cover the higher bills. You'll receive an escrow analysis statement explaining the change.

Question 2

Can I get an escrow refund?

Accepted Answer

Yes — if your escrow account has a surplus above the allowed cushion (2 months of payments), your lender must refund the excess. This happens when taxes or insurance premiums were lower than projected. Refund checks typically arrive within 30 days of your annual escrow analysis.

Question 3

What is an escrow shortage and how do I pay it?

Accepted Answer

A shortage occurs when your escrow account doesn't have enough funds to cover bills that were higher than projected. You can pay the shortage as a lump sum (often the cheaper option) or spread it over 12 months added to your payment. If you can absorb it, the lump sum prevents a higher monthly payment for the year.

Question 4

Do I have to have an escrow account?

Accepted Answer

For most conventional loans with 20%+ down, you can request an escrow waiver — though many lenders charge a fee (0.125–0.25% of the loan) or require a slightly higher rate. FHA and VA loans typically require escrow. The advantage of waiving: you keep the money in your own account earning interest until bills are due.

Question 5

How much is collected for escrow at closing?

Accepted Answer

At closing, you'll prepay 2–3 months of property taxes and 1 full year of homeowner's insurance (paid to the insurance company directly), plus 2 months of insurance escrow. This initial funding can add $3,000–$8,000 to your closing costs depending on your tax rate and home value.

What Is a Mortgage Escrow Account and How Does It Work?

Frequently Asked Questions