How they work
When you make your monthly mortgage payment, you're not just paying toward your loan — you're also setting aside funds to cover your property taxes and homeowner’s insurance. That’s where the escrow account comes in.
What Is an Escrow Account?
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An escrow account is a separate account managed by your mortgage servicer. It’s used to collect and hold money for:
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Property taxes
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Homeowner’s insurance
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(Sometimes) Flood insurance or other local assessments
Instead of paying those large bills all at once, your lender spreads them out over 12 months and includes them in your mortgage payment.
Annual Escrow Analysis & Shortage Notices
Each year, your mortgage servicer performs an escrow analysis to check if the amounts being collected for taxes and insurance are accurate.
They compare what was actually paid out to what was collected, and then adjust your monthly payment if needed. If there’s not enough in your escrow account to cover upcoming bills, you’ll receive a shortage notice.
This usually comes with two options:
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Pay the shortage in full.
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Spread it out over the next 12 months (which will increase your mortgage payment).
This is why our Spring and Winter reviews are so important. We are process helps prevent surprises and keeps your account on track — even when tax or insurance costs change.