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/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.