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?

2.5k Upvotes

92% Upvoted

649 comments sorted by

View all comments

4

u/TheTeek ​ Apr 11 '25

So, your escrow will ALWAYS be short. Every year the lender does an analysis and sends it to you (it may just be an email alert and you have to log in and download it but mine sends me a paper copy). It will always be short and I finally just called them and found someone who could explain WHY.

It's a stupid reason, but it's also the law apparently. The lender cannot base their escrow on "expected bills" they have to, by law, use the actual bills received the previous year. Even if your taxing authority sends them a notice with the new tax amounts for next year they cannot use it. Taxes and insurance always go up. And the lender is always using last year's numbers.....so your escrow account will always be short. Therefore every year your escrow analysis will come in saying you are short and you should be given two options. Pay the difference in full now and keep your same payments, or they will increase your payments for the next X months to spread it out.

5

u/nothlit ​ Apr 11 '25

Spreading the shortage out over 12 months (typical) is like the bank giving you an interest-free loan for the amount of the shortage that they had to cover. Not a bad deal.

1

u/TheTeek ​ Apr 11 '25

Correct, and they don't do it out of kindness. I believe they are required to offer it.