Know your numbers
Why your mortgage payment went up: how to read your escrow analysis
If you have an escrow account, your payment probably went up because a property tax or insurance bill came in higher than your servicer expected. The yearly escrow analysis shows which bill it was, how short the account fell and your new payment. On a fixed-rate loan, principal and interest stay the same, so the change is in escrow, and the bill behind it is where you can save.
Your mortgage payment changed, and the letter explaining it reads like a tax form. If you have an escrow account, the reason is almost always in one place: the yearly escrow analysis your servicer sends. It names the bill that went up, and that bill is where you can save. Here is how to read it, how to find that bill and what to do next.
What escrow is and why the payment moves
An escrow account is money your servicer (the company that collects your mortgage payment) holds to pay your property taxes and home insurance. Part of each monthly payment goes into it, and the servicer pays those bills when they come due.
Once a year the servicer runs an escrow analysis. It compares what it actually paid with what it expected to pay, then sets the escrow part of your payment for the year ahead.
When a bill comes in higher than expected, two things happen at once. The account comes up short, because more went out than came in. And your monthly escrow amount goes up, because next year's bill is expected to be higher too. That is why your payment can rise by more than the bill did: you are making up the gap and also paying toward the higher bill.
On a fixed-rate loan, your principal and interest do not change. The escrow part is what moved.
How to read your escrow analysis
Every servicer lays out its statement a little differently, but they all have the same four pieces. Go through them in this order.
- Find the account history. This section lists each payment in and each bill paid out, with what the servicer expected next to what actually happened. Many servicers mark the lines that came out different with an asterisk or a letter.
- Compare each bill, expected against actual. Check property taxes, home insurance and any flood or mortgage insurance. The line with the biggest gap is the bill that changed your payment.
- Find the shortage. A shortage means the account is projected to drop below the minimum balance (a small cushion, at most two months of escrow) the servicer is allowed to hold. A deficiency is worse: the account actually went below zero. The statement says how much you owe and usually gives you two ways to cover it.
- Find the new payment. It usually appears near the top or bottom, split into principal and interest plus escrow, along with the date it starts.
Here is a sample analysis with the four pieces marked. The servicer, the owner and every figure on it are made up for this post.
In the sample, insurance did most of the damage: $480 of the $522 gap. Paying the $696 shortage up front would hold the rise to $43.50 a month. Spreading it adds another $58 a month for a year.
Where your premium sits against similar homes near you
For many owners the bill behind the shortage is home insurance. To see whether yours is high, compare your yearly premium with what owners of similar homes near you paid. The table uses the Census Bureau's American Community Survey for homes valued $400,000 to $600,000, one Census area per metro: five years of answers, 2020 to 2024, in 2024 dollars.
| Metro (ZIP) | Typical yearly premium |
|---|---|
| Denver (80220) | $1,624 |
| Salt Lake City (84106) | $1,069 |
| Austin (78745) | $1,869 |
| Atlanta (30044) | $1,600 |
| Baltimore (21234) | $1,400 |
| Columbus (43214) | $1,300 |
| San Luis Obispo-Paso Robles (93446) | $1,300 |
These pool the survey's answers from 2020 to 2024, the latest it has, so they describe recent years, not this year's renewal. If your premium today is close to your metro's figure, it is probably in the normal range. If it is well above, it is worth getting quotes.
Figures vary a lot within a metro. In the same survey, similar homes in the Census area that holds Arvada's ZIP 80004 paid a typical $2,300 a year, against $1,624 for the Denver row above.
Within that same survey, the typical premium for similar homes was about 25% to 45% higher among 2024 answers than among 2020 answers in each of our seven metros' states (before inflation; 2020 answers were collected during the pandemic).
Open your insurance declarations page (the summary page of your policy) and find your yearly premium. Then compare it with your metro's row.
If you are close to your metro's figure, the better move is usually to work on the other parts of the payment.
These figures describe similar homes in a single Census area per metro, grouped by home value. They describe neither the whole metro nor any Nimbus member.
What to do with the new payment
- Shop your insurance before it renews, and compare quotes for the same coverage. If you switch, send the new declarations page to your servicer so it pays the right company, and ask it to run a new analysis.
- Ask about a multi-policy discount. Insuring your home and car with the same company often lowers both.
- Raise your deductible only if your cash reserve could cover it the day you file a claim.
- Check your property tax. Make sure any homestead exemption you qualify for is applied, and if the assessed value looks high, appeal it before the deadline printed on your notice.
- Decide whether to pay the shortage now or spread it out. Paying it now keeps your monthly payment lower. Spreading it out keeps cash in your account. Pay it now only if your emergency reserve is still whole afterward.
- Watch next year's analysis. If your premium or tax bill goes down, the escrow part of your payment comes down with it. Some servicers will run a new analysis early if you ask.
If you are buying a home
Escrow surprises hit new owners hardest. The first estimate often uses the seller's tax bill and a brand-new insurance quote, and neither one tells you what next year will cost.
The fear underneath is buying at the wrong time. You cannot control the market, but you can make the purchase sound whatever the market does. Plan to stay long enough to ride out ups and downs. Make sure the full payment, taxes and insurance included, fits your budget with room left for a higher insurance bill. And keep cash in reserve after closing. Get an insurance quote before you make an offer, and ask how property taxes are reassessed after a sale where you are buying.
Upload it and Nimbus will look it over
You don't have to work through the statement line by line. Upload your servicer's yearly escrow analysis to Nimbus and it will look it over: your new payment, the shortage, and the bill that came in above the servicer's projection.
Frequently asked questions
What is an escrow shortage?
A shortage means your escrow account is projected to fall below the minimum balance your servicer may hold, usually because a tax or insurance bill came in higher than expected. Your escrow analysis says how much you are short and the ways you can cover it.
Why did my payment go up if my interest rate is fixed?
A fixed rate locks your principal and interest, not your escrow. If property taxes or home insurance went up, the escrow part of your payment goes up to make up the gap and to cover the higher bill next year.
Should I pay the shortage now or spread it out?
Paying it now keeps your monthly payment lower. Spreading it out keeps cash in your account. Pay it now only if your emergency reserve is still whole afterward.
Will my payment go back down if my insurance gets cheaper?
Yes, at the next escrow analysis. If you switch to a cheaper policy, send the new declarations page to your servicer and ask whether it will run a new analysis early.
How do I know if my home insurance is too high?
Compare your yearly premium with the Census survey figure for similar homes in your area. If you pay well above the typical figure for your area, get quotes for the same coverage. If you are close to it, your premium is probably in the normal range for your area.