Why Did My Escrow Payment Go Up?

Your escrow payment went up because your loan servicer’s annual escrow analysis found that last year’s monthly escrow deposits were not enough to cover your property taxes and homeowners insurance. Servicers run this review once per year and adjust your monthly payment to cover the shortfall. The two most common causes are a property tax increase and a higher homeowners insurance premium.

If your total monthly mortgage payment jumped $75, $100, or more, the escrow portion is often the reason — even when your interest rate did not change.

Opening your escrow analysis letter takes five minutes. It lists every deposit, every disbursement, and the exact reason your payment changed. Keep that letter — it is the fastest way to verify the math before you call your servicer.

What Is an Escrow Analysis?

An escrow analysis is a yearly review of your escrow account. Your servicer compares what you paid in over the last 12 months against what it actually paid out for taxes and insurance.

Under RESPA (Regulation X, 12 CFR § 1024.17), your servicer must keep enough money in the account to cover upcoming bills. It may also hold a cushion of up to two months of escrow payments — capped at one-sixth (1/6) of your estimated total annual escrow disbursements.

Example: If your annual property taxes are $4,800 and annual insurance is $1,800, total annual escrow costs are $6,600. Your base monthly escrow deposit is $550 ($6,600 ÷ 12). The maximum RESPA cushion is $1,100 (2 × $550, or 1/6 of $6,600).

After the analysis, your servicer sends an escrow statement showing last year’s activity, projected bills for the next year, any shortage or surplus, and your new monthly escrow amount.

Federal law requires your servicer to send this analysis at least once every 12 months. The statement must show your payment history, a running balance, and the new monthly escrow amount at least 30 days before it takes effect — so you have time to plan for a higher bill.

The Two Reasons Your Escrow Payment Went Up

Most escrow increases trace back to two bills your servicer pays on your behalf.

Your property taxes increased

Local tax assessors can raise your assessed value or your tax rate. Even a 1% increase on a $400,000 home adds $4,000 in assessed value — which can mean $40 to $80+ more per month in escrow, depending on your local tax rate.

If taxes rose $720 for the year ($60/month), your servicer needs $60 more each month going forward just to stay current.

Your homeowners insurance premium increased

Insurance costs have risen in many areas due to weather claims and rebuilding costs. If your annual premium jumped from $1,800 to $2,160, that is $360 more per year — or $30/month added to escrow.

Combined, a $720 tax increase and $360 insurance increase total $1,080 more per year. Spread across 12 months, that alone adds $90/month to your escrow payment.

Some homeowners see both increases in the same year. A $90/month jump on a $1,800/month total mortgage payment is a 5% increase — even though your loan terms never changed.

What Is an Escrow Shortage?

An escrow shortage happens when the account did not collect enough to pay bills that were already due. The servicer paid your tax or insurance bill from the account even though your balance was too low.

Example math:

• Projected annual escrow need (after increases): $7,680
• What you actually deposited last year: $6,600
• Shortfall: $1,080

Your servicer may require you to repay part or all of that gap. Under RESPA, if you spread a shortage repayment, the servicer must allow at least 12 equal monthly payments.

If the shortage is $540, spreading it over 12 months adds $45/month on top of the $90/month increase for higher bills. Your escrow payment could rise $135/month total.

You have two main options:

1. Pay the shortage in one lump sum — lowers your new monthly payment.
2. Spread the shortage over 12 months — smaller upfront cost, higher monthly payment.

See our article on escrow shortages for a full breakdown of which option makes more sense.

What to Do If Your Escrow Payment Went Up Significantly

Pay the shortage in full

If you have $540 (or whatever your statement shows) available, paying the shortage upfront removes the extra $45/month spread charge. Your payment still rises for the higher tax and insurance costs, but you avoid the double hit.

Spread the shortage over 12 months

This is the default for many homeowners. A $540 shortage costs $45/month for one year. After 12 on-time payments, that piece drops off — though your base escrow may stay higher if taxes and insurance remain elevated.

Appeal your property tax assessment

If your assessed value jumped sharply, you may be able to appeal with your county assessor. A successful appeal that lowers taxes by $600/year saves $50/month in escrow.

Check your county assessor’s deadline — many windows are 30 to 60 days after your assessment notice.

Shop your homeowners insurance

Get quotes from at least 3 insurers. A $300/year savings cuts escrow by $25/month. Bundle discounts and higher deductibles can reduce premiums, but make sure you can afford the deductible if you file a claim.

Ask about wind, hail, and flood riders if you live in a high-risk area. Dropping unnecessary coverage lowers premiums, but underinsuring saves $20/month and costs far more after one major claim.

Frequently Asked Questions

Why did my escrow payment go up?

Your escrow payment went up because property taxes, insurance premiums, or both increased, and your servicer adjusted your monthly deposit to match. An annual escrow analysis may also add a shortage repayment if last year’s deposits fell short.

What is an escrow shortage?

An escrow shortage means your account did not have enough money when the servicer paid your tax or insurance bills. You must repay the gap, either in one payment or over at least 12 months.

Does an escrow shortage affect my credit score?

No. An escrow shortage is not reported to credit bureaus. It is an adjustment to your mortgage payment, not a new loan or missed payment — as long as you pay your updated mortgage bill on time.

Can I remove escrow from my mortgage?

Sometimes. Many lenders allow escrow waiver if you have roughly 20% equity, a strong payment history, and meet other requirements. Some charge a fee. You would then pay taxes and insurance directly.

Why does my escrow keep going up every year?

Rising property tax assessments and insurance premiums push escrow higher each year. Re-shop insurance, appeal taxes if values seem too high, and review your escrow statement annually. See our article on how escrow works in a mortgage for the full monthly flow.

Ready to review your overall mortgage picture? Get a free rate quote through LendingTree to see if refinancing could lower your total payment.

Keep your annual escrow analysis letter in a folder with your tax and insurance bills. When next year's letter arrives, you can compare year-over-year changes in minutes instead of starting from scratch.