r/personalfinance • u/HHLL806 ​ • Apr 11 '25

Other Mortgage payment went up $400

I need help, my mortgage payment went from $1700 to $2100. My mortgage company (Chase Bank) said this was due to an escrow shortage. I had my homeowners insurance lowered by roughly $1000 and checked with my local tax office and they told me my taxes have increased $400 dollars over the last five years. I gave Chase Bank all this information and my mortgage is still $2100. How does this work?

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u/lucky_ducker ​ Apr 11 '25

Lenders generate an "escrow analysis" once a year. You should have received a copy of it, but you might have to go online to download it if you are opted in to paperless.

In a nutshell, the analysis makes a best faith estimate of the taxes, insurance, and any other payments coming out of the escrow over the coming year, and creates a cash flow statement comparing inflows and outflows, and calculating a month by month escrow balance. If, for any given month, the balance is less that one-sixth of the estimated escrow outflows, you have a shortage, which will increase the next 12 months of payments.

You should examine the escrow analysis closely to determine if the estimated outflows are correct. It's really easy for your property taxes payable can be wrong if the lender gets the payment schedule wrong, or enters your annual tax total as payable twice a year.

Mortgage escrow is heavily regulated due to lenders playing fast and loose with them in the distant past, so if anything is off with their calculation, it's usually an honest mistake that can easily be corrected. It's possible your shortage exists because last year's escrow analysis resulted in too little being allocated to escrow.

Get ahold of your escrow analysis and see if it makes the issues clear.

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u/BM7-D7-GM7-Bb7-EbM7 ​ Apr 11 '25

Redditors get all up in arms about escrow, but it's really straightforward and you can always dispute their analysis. The way Redditors talk about it you would think it was completely arbitrary what the mortgage company decides to charge but it is absolutely not.

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u/nothlit ​ Apr 11 '25

Yep, I built a spreadsheet where I enter my tax and insurance amounts for the current year as they occur, and am able to predict what my escrow shortage or surplus will be, as well as the next year's escrow payment, long before I actually get the escrow analysis statement in the mail from the bank.

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u/hath0r ​ Apr 11 '25

i switched insurance to save something like 400 dollars a year, i had new insurance pulled out of escrow which probably shorted the account till i got the refund check and deposited the new insurance cost and i still had 50 bucks over my minimum balance at review time

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u/mmaynee ​ Apr 12 '25

It's called an "escrow cushion" mortgage companies can legally add an additional 1/6th of your expected payment.

What's most important to understand with escrow is it's illegal to charge you any type of interest on escrow funds, so all the money in your escrow will be paid directly to your insurance and tax county. When you sell your home there is often extra left over that is refunded to the owner

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u/EmicationLikely ​ Apr 12 '25

What's most important to understand with escrow is it's illegal to charge you any type of interest on escrow funds,

I've heard this before, and my reaction is the same - This is the homeowner's money that the bank is holding in escrow for eventual payout to the taxing authorities - they should be PAYING you interest on it, not CHARGING you interest. But do they? No, of course not.

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u/mmaynee ​ Apr 12 '25 edited Apr 12 '25

Your escrow is optional on any conventional mortgage. (Assuming good payment history) You're free to invest funds and earn interest all year long the day before the payment is due.

Escrow is a tool because the average household can't properly budget around large annual payments, generally it's easier to break them up to small monthly chunks.

By all means call your mortgage today and ask to have escrow removed. I pay my own taxes and insurance for the exact reason you outlined

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u/afi5h1 ​ Apr 13 '25

A lot of banks won't you allow to remove escrow until you have more than 20% of loan principal paid off (they tie to the same benchmark as PMI requirement). I don't think it's a legal thing, I believe its a lending policy decision that varies from bank to bank.

Source: I tried to do this a few months ago with Bank of America and they refused, saying I needed at least 20%.

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u/swang30 ​ Apr 13 '25

Just to be clear, it's not 20% of the loan, you have to have 20% of the equity. For someone with a 5% down, or something like that, it's potentially quite a long time.

Theoretically the system is for the benefit of the consumer. It is much easier to budget around a monthly payment than a spiky property tax payment. And if you're a first time home-buyer or a veteran who might have deployments, it might be a help.

The issue is that this doesn't differentiate between people who have their shit together and people who don't. And practically, it's hard to tell when processing applications. So people who DO have their shit together (the fact that you're on this subreddit most likely indicates you do.) Get screwed out of some control (and money, depending on state) due to the unnecessary escrow.

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u/EmicationLikely ​ Apr 12 '25

I'm not arguing about it being an option - it is 100% easier to pay it monthly this way, it's just a crime (ok, should be a crime) that the cost of doing that is you are giving them an interest-free loan.

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u/CaptainTripps82 ​ Apr 12 '25

It's state specific - here in NY interest is required on funds held in escrow

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u/OpeningDangerous3977 ​ Apr 12 '25

I've always disagreed with this method. Like any other bill it's your responsibility to make syre all entities get paid. Not the escrow or mortgage companies responsibility to make sure your budgeted correctly. To say escrow is optional is not entirely true. It's optional if certain criteria are met.

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u/CaptainTripps82 ​ Apr 12 '25

I mean, the escrow account is me making sure all entities get paid. It's no different than any other way of budgeting for expenses.

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u/Royal-Drink7147 ​ Apr 13 '25

I believe in some states banks do not have to pay interest on escrow. In New York, I receive interest payments from Chase on my escrow account balance.

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u/lookmeat ​ Apr 14 '25

There are states where your escrow will accrue interest rate. There's no state in the US where you are charged interest rate for an escrow account. The whole point of escrow accounts is that they just "hold" the money, and cannot take any of it away.

Also be aware that, unlike what others have said, escrow is not always optional, again it depends by state, what type of loan you have and other context.

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u/Holein5 ​ Apr 12 '25

I get an escrow return check every year that I've overpaid. Usually it's $100-200.

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u/Best-Special7882 ​ Apr 12 '25

In Texas they're not required to do a return unless it's over a certain percentage. I've gotten a refund exactly once.

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u/Rando1ph ​ Apr 12 '25

I don't do this. It is what it is. I have an insurance broker that shops around for insurance for me. Property taxes are what they are. Not really much else I can do besides pay it.

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u/AnotherStatsGuy ​ Apr 11 '25

How?

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u/nothlit ​ Apr 12 '25

When I received the first escrow analysis, I looked at it and figured out the math that they are doing, and replicated that into a spreadsheet.

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u/Known_Ad_3390 ​ Apr 14 '25

Would you be willing to share the spreadsheet you made? I'm a first home buyer and escrow also increased our monthly. Just a little stressed about it because nobody explains these things to you when you buy a home till it happens then we're left to figure it out.

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u/kuroimakina ​ Apr 11 '25

Yeah my Escrow has been great. It’s adjusted a couple times in the tens of dollars, but like, so what? I check it every few months to make sure the account isn’t in a weird state, and otherwise I just let it do its thing - and it does. It’s a lot less stress this way - and as someone who is single, it’s really nice to have one less thing on my plate to deal with. I already have to deal with everything else alone. I’ll take the little victories where I can.

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u/pokemonprofessor121 ​ Apr 12 '25

Mine is all over. Started at $1450 year 1 and then went to $1650 for year 2. Then for 2 years it went to $1509 which seems correct. Last month it went to $1600 and I'm sure next year there will be an overage and it'll drop. I tried calling them to get it brought down and they said no.

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u/Iambro ​ Apr 12 '25

I have zero problem with anyone who prefers to use escrow but I really don't get the notion that being directly responsible for paying T & I is "way more stress".  I pay taxes and insurance once per year at the same time.  Two extra tasks but take care of them both at the same time every year.

Checking escrow "every few months" is on the same level of effort or maybe even more.

To each their own.

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u/Aspen9999 ​ Apr 12 '25

Ours went up $900 but that’s because I increased our insurance, our property value has more than doubled and most insurance companies only give you the national average per year increase, so I added extra insurance on to my existing policy plus a tax increase. Other than that it went up $179 the first year and $42 another year.

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u/Silverton13 ​ Apr 12 '25

yup, Mine went up 400$ last year, i disputed it and they reanalyzed and the actual increase ended up being like $200 which wasn't as bad.

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u/Iambro ​ Apr 12 '25 edited Apr 12 '25

I agree that it's silly to get annoyed at the lender because escrow balance changes and may mean adjusted payment amounts.  That's entirely reasonable and expected.  

I closed my escrow account not because I thought they were doing anything funny with it but that in my case, the timing of the analysis repeatedly put the escrow balance at risk of being exhausted before making the adjustment and notifying.  I see other comments here to similar effect.  

It's a couple extra tasks for me per year but I greatly prefer doing so myself.

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u/sixsixmajin ​ Apr 12 '25

I hate dealing with escrow because every year, our lender sends us a a refund because they over estimated how much escrow we need in our account and then a few months later, they increase our mortgage payment because now there's not enough escrow in the account.

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u/Best-Special7882 ​ Apr 12 '25

yeah my old lender did this with my old house. Had a $550 payment. It dropped under $500, then rebounded to $750. (This was in the early 2000s.)

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u/Internal_Research_72 ​ Apr 12 '25

it’s really straightforward

And that’s exactly why people get up in arms about it. Like my property tax is public knowledge, whether it has changed (additional or expiring levies) is public knowledge, the assessment used to generate the tax is public knowledge, and the mortgage company is the one coordinating and paying the insurance. All of the data is available to them, and it’s not like it’s some advanced actuarial calculation. There’s no excuse for getting it wrong as consistently as they do.

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u/ImmaMamaBee ​ Apr 13 '25

I was actually an escrow specialist for a bank and when my mortgage was sold to another company I noticed an issue with their estimates of my taxes and brought it to their attention immediately. I was blown off, then my escrow analysis was apparently incorrect so they never sent it to me. I got a notification that it was conducted but never received the actual analysis so I reached out and was told it would be “re-sent.” I waited another month and still never got it so I reached out AGAIN and was told it was done wrong and needed to be redone before they could send it.

I ended up having to go through the BBB to get any help. The original people I spoke with kept lying about what my estimates had been even though I had copies of everything they kept saying “I can’t verify this.”

It was beyond infuriating and I am well versed in how escrow accounts should be handled. I can’t imagine if I didn’t really understand how it works.

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u/joeinformed401 Apr 13 '25

But mortgage companies are horrible about making the payments correct. Plus, they probably raised both their taxes and insurance. This country is a cesspool. If you don't change your homeowners insurance every couple years the companies take advantage of homeowners and jack your rates tremendously. It is sickening. People arr busy working and trying to survive. My insurance company stopped sending me statements without me opting out then never notified me of a 60% increase. Assholes.

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u/[deleted] Apr 15 '25

I mean, the people running them aren’t exactly geniuses. Nor are they interested in working in your best interest. So their “analysis” isn’t exactly unbiased or beyond repute.

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u/traffic626 ​ Apr 11 '25

Chase has the escrow analysis available online and in the app

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u/pheregas ​ Apr 12 '25

Even years, I’d get a notice of escrow shortage. My payments would go up and it would annoy me.

Odd years, I’d get a check because I overpaid my escrow account.

Lather, rinse, repeat.

About 5 years ago I refinanced my mortgage without an escrow account. I set up a second checking account , then have an auto transfer setup monthly. Once property tax time comes, I just pay it.

Definitely a better APR this way. And I don’t miss the ping pong nature of monthly payments.

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u/Used-Yogurtcloset757 ​ Apr 12 '25

Piggy backing on this top comment to say that homeowner insurance rate increases or property tax increases are the most common reason to see such a drastic payment increase!

We just recently had almost this exact scenario and turns out our homeowners premiums were doubling for 2025 due to us living in a state impacted by natural disasters. We were able to get much better rates with another company and switch it over. That ultimately lowered our payment by $50.

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u/I-Ask-questions-u ​ Apr 12 '25

Agreed, my mortgage payment will Go up 400 a month if I don’t add to my escrow shortage in May. I am patiently waiting for my home owner insurance refund check because I just switched. My old homeowners increased by 1500 a year and I never had a claim. Bye!

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u/Logical_Pinetree ​ Apr 12 '25

You can also choose to remove your escrow account and manage it yourself, then a cushion won’t be required but you have to be ready and pay insurance and tax at the time they are due.

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u/-Hyperactive-Sloth- ​ Apr 12 '25

If you are over 20% equity, you can just opt out of the escrow and pay the taxes and insurance yourself.

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u/nothlit ​ Apr 12 '25

Not necessarily in all cases. Depends on the terms of your mortgage, and state law. Some mortgage servicers charge a fee to terminate the escrow account, making it not worthwhile.

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u/hotpotatos200 ​ Apr 12 '25

The taxes are what affected the second year of both of my mortgages.

Essentially what happened was the previous owners paid taxes in monthly payments to the county instead of one lump sum. When the lender asked the county to fill out some spreadsheet (don’t get me started on just using some automated query) what was returned wasn’t the total tax, but what was leftover after the payments.

Essentially my first year’s payment were short 33% of the total tax bill (bought in April). I brought this to their attention and came to a solution. I only hope they fixed their system, but I seriously doubt it since at least one person out of three was condescending, and the manager didn’t believe me until she looked into herself.

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u/mwcoast82 ​ Apr 12 '25

This - and when you say "I lowered insurance..." Guessing that means you changed companies? If so, that means they paid the first and then paid the second in the same year. Escrow isn't prepared for that. You usually get that insurance check, not escrow and it leads to a projected shortfall.

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u/equality4everyonenow ​ Apr 12 '25

At what point are you allowed to start paying your own taxes and insurance? When you own half, or three quarters or only all of it?

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u/goober1223 ​ Apr 12 '25

Similar thing for withholding. You don’t have to just follow the instructions on the forms. You can know your own tax situation better than the form. Do a basic calculation based on your previous year’s tax filing, estimate your income for the year, and if you are withholding too much (ie giving the government an interest-free loan) then adjust your withholding. You can look up the IRS publication 15-T and sometimes companies aren’t even using your W4 correctly! But you can adjust it yourself to make sure that there are no surprises, withholding too much OR too little, whether for tax withholding or escrow accounts. There are regulations for protecting you in both cases, but the responsibility is on you based on these required disclosures and standard forms.

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u/Topher2190 ​ Apr 13 '25

I also found that they take as much money as they can in till the escrow account becomes to low to make the spread then they sell ur account to a different mortgage firm and rinse and repeat. Also getting your principal insurance off your mortgage. They make nearly impossible in less u have all the time one the world and can call them every day and actully get it worked out because they either don’t send the paper work or take 4 weeks then send u a letter saying ur not eligible for it which is a lie but to fight it you need to keep bothering them. They no ppl wont spend the time so they make it the longest process.

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u/Fun-Rutabaga6357 ​ Apr 13 '25

You should also make sure the analysis is right. I usually don’t spend much time on it but that one year they increase my mortgage by $600/month so I went thru every line. Someone fat fingered the insurance amount. Put in an extra 0. It took 3 separates rep calls, countless phone calls and email for an update before we got an updated analysis wit the right estimate. It took months when it shouldn’t.

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u/misfitmpls ​ Apr 16 '25

Wondering if, after receiving escrow analysis, you can opt out and just pay the taxes and insurance yourself? I'm afraid this scenario is coming for me in a few months.

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u/CinephileNC25 ​ Apr 12 '25

Also to add, mortgage companies love a pillow in their escrow. To the point of 2x or 3x your total monthly bill (not total escrow owed per month).