What's An Escrow Analyis?

What an Escrow Analysis Is

An escrow analysis is a review your mortgage servicer does—usually once a year—to make sure your monthly escrow payment will cover your annual property tax and homeowners insurance bills when they come due.

Your escrow account is basically a holding tank. Each month, part of your mortgage payment goes into that tank. Then, when tax and insurance bills show up, your servicer pays them on your behalf from that account.

Why They’re Done

The main goals are:

1. Check the math – Are we collecting enough (or too much) to pay those bills?

2. Adjust for changes – If taxes or insurance go up or down, your monthly escrow payment gets adjusted so your account doesn’t end up empty or overstuffed.

3. Prevent surprises – The goal is to avoid a “shortage” (not enough money when the bills are due) or an excessive “surplus.”

When an Escrow Shortage Happens

A shortage means that, based on current deposits and projected bills, your escrow account won’t have enough to cover upcoming payments. This often happens when:

• Property taxes increase.

• Insurance premiums go up.

• Tax or insurance bills were underestimated in the previous analysis.

What to Do If You Have a Shortage

You have two main options:

1. Pay the shortage in a lump sum – This immediately fills the gap, and your monthly escrow payment will still go up to reflect the higher bill amounts.

2. Spread the shortage over 12 months – The shortage is divided and added to your monthly payment along with the new estimated escrow amount.

Either way, your monthly payment will likely rise if your annual bills are higher.

Pro tip: If you get a shortage notice and don’t understand it—call me (Mel T). I’ll walk you through exactly how the numbers work and what your payment will be under each option.

Common Escrow Questions (and Straight Answers)

Q: Why not just pay taxes and insurance myself? A: You can in some cases, but escrow ensures those bills are paid on time automatically—no missed deadlines, no late fees, no “oops” moments.

Q: Why did my payment increase if I didn’t change anything? A: Because taxes or insurance went up, or last year’s estimates were lower than the actual bills.

Q: Can I get money back from escrow? A: Yes—if there’s a surplus of more than $50 after all bills are paid, you’ll usually get a refund check.

Q: What happens if I ignore a shortage? A: Your mortgage servicer will still pay your bills, but your escrow account will go negative, and your monthly payment will be adjusted (sometimes significantly) to bring it back up.