Understanding Changes to Your Escrow Account | Escrow Part 2

For those who don’t want to get hit with annual payments for mortgage-related expenses such as property taxes and homeowners insurance, you can set up an escrow account and combine those bills with your monthly mortgage payment. 

The amount of money we collect for your escrow account may change from year to year. If you’re wondering what causes these changes, I’ll answer commonly asked questions:

Why is my escrow amount changing?
We conduct an escrow analysis once each year.  At that time we review your account to make sure the funds set aside for escrow will cover your projected disbursements for the year.

If any of the amounts have changed from the prior year, we will recalculate your escrow payment, and we’ll also make sure any minimum balances on your escrow account are met. If, for example, your taxes or insurance premiums increase or decrease, this change will be reflected in the amount due. We’ll outline any changes in your annual escrow analysis.

What happens if I have a shortage in my escrow account?
There may be a shortage in your escrow account if any of your estimated bills were higher than expected. We will provide you with your options for correcting any shortage. Generally, you can cover the difference with one lump-sum payment or divide your shortage over 12 months and add it to your monthly escrow payment. If the shortage is not paid in full, we will automatically divide it.

What happens if I have an overage in my escrow account?
If you experience an overage in your account of $50 or greater, we are required by law to send you a refund check. For an overage that is less than $50, we will apply that amount to your escrow balance, which may reduce your next 12 monthly escrow payments.

Why does my escrow account have a minimum required balance?
Federal or state law regulates the minimum balance. A minimum balance is equal to the lowest balance you are projected to owe for the next 12-month period, plus two months of escrow payments. By having the two-month cushion in your account, you should be able to absorb any small, unexpected increases that might otherwise overdraw your escrow account.

To learn more about escrow, visit our website , or contact our loan department directly at 217-747-8633 or via email.