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Escrow accounts explained
Why your mortgage payment changes even with a fixed rate.
Many lenders collect money for property taxes and insurance with your mortgage payment and pay those bills for you from an escrow account. When taxes or insurance go up, your payment goes up too.
The yearly escrow analysis
- Your servicer reviews the account each year
- If taxes or insurance rose, there may be a shortage
- You can usually pay a shortage in one go or spread it over the next year
- If there's a surplus above a set amount, it's typically refunded
Plan for it
When your insurance renews or a new tax bill is issued, compare it with last year. If it went up, expect the mortgage payment to rise at the next analysis and adjust your budget early.
General educational information. Costs vary by home and location. Better Home Budget isn't paid by any lender, insurer or contractor.