An escrow account allows us to pay the required insurance and/or taxes on your property for you. You pay a portion of your taxes and/or insurance premiums as part of your monthly mortgage payment. Then, when taxes and/or premiums are due, we’ll pay them on your behalf with the money in your escrow account. This saves you time and gives you peace of mind that your payments will be made on time.
Every year, we review your escrow account to make sure there is enough money to cover your property taxes and/or homeowner’s insurance and not go below the minimum required balance. Your annual escrow analysis details the amount we paid on your behalf in the past 12 months and includes projections for the next 12 months.
A shortage occurs when the escrow account balance at its projected lowest point for the next 12 months is below the required minimum balance. If your taxes and/or insurance costs were lower than expected, your account may have a surplus.
If you have questions about an increase in your property taxes or insurance premiums, please contact your local taxing authority or insurance agent.
Each year we project how much you’ll need in your escrow account for the upcoming year. We base it on the amount of taxes and/or insurance you paid during the past 12 months. The total paid is divided by 12 to get your projected monthly escrow payment.
Sometimes, your payment must be adjusted to ensure your monthly balance remains above a required minimum balance during the next 12 months. This minimum balance is typically equal to two months of escrow payments.
If your taxes and/or insurance change during the next year or your monthly escrow balance falls below the required minimum amount, you could have a shortage or surplus in your account when we do an Annual Escrow Analysis next year.
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