If you’ve noticed an increase in your escrow payment, you’re not alone – many homeowners are experiencing this. Understanding why your escrow payment has increased and knowing how to address it can help you manage your monthly mortgage expenses more effectively.
Why Did Your Escrow Payment Increase?
Your escrow payments are used to cover property taxes and homeowners insurance, so when these costs rise, your escrow payment does, too.
To understand the exact reason for the increase, you can review your escrow analysis statement, which your mortgage servicer provides annually. The statement will outline whether the rise is due to higher property taxes, an increase in homeowners insurance premiums, or a shortage in your escrow account from a previous year.
How Can You Lower Your Escrow Payment?
1. Appeal Your Property Tax Assessment
Property taxes are one of the most common reasons escrow payments increase, but fortunately, you may be able to challenge your home’s assessed value and potentially lower your property tax bill.
Start by contacting your local tax assessor’s office to review your property valuation and get more information on the appeals process. Then, look at recent sales of comparable homes in your neighborhood to help determine if your valuation aligns with current market conditions or is overvalued.
If you find discrepancies, collect any proof that shows your property’s value is lower than the assessed value. This can include comparable home sales, a recent appraisal, or estimates for repairs your property may need. After collecting sufficient evidence, follow your local tax assessor’s process to file the appeal.
2. Review and Adjust Your Homeowners Insurance Policy
A higher homeowners insurance premium can also drive up your escrow payment. Insurance rates can rise for various reasons, including inflation, changes in coverage, or claims history. To potentially lower your premium, consider:
- Raising your deductible: A higher deductible often helps lower your monthly premium.
- Bundling policies: Bundling your home and auto insurance policies with the same provider can result in discounts.
- Shopping around: Get quotes from multiple insurance providers to find the best rate.
- Inquire about discounts: Ask your current insurer about available discounts, such as security system incentives or loyalty rewards.
3. Request an Escrow Analysis from Your Lender
If your escrow payment has increased, you can request an escrow analysis from your mortgage servicer.
This analysis will review your current escrow account balance and payments to determine whether adjustments can be made. In some cases, if your escrow account has a surplus, your lender may lower your monthly escrow payment or issue a refund.
Final Thoughts
An unexpected increase in your escrow payment can put a strain on your budget, but there are steps you can take to manage it. By understanding the cause of the increase, appealing your property tax assessment, reviewing your homeowners insurance options, and working with your lender, you may be able to lower your escrow payment and ease financial stress.
If you’re unsure about the best course of action, consider consulting a financial advisor or real estate professional for guidance.
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Cory Reamer,
is an Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Cory graduated as a student-athlete with a degree in Finance from The University of Alabama and is passionate about helping others on their financial journey. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
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