Why Did My Mortgage Payment Suddenly Increase?
If you have a mortgage, you may have noticed your monthly payment increased even though your mortgage interest rate didn’t change.
One possible reason is an escrow shortage.
Your mortgage servicer may collect money each month for property taxes and homeowners insurance. That money goes into an escrow account and is later used to pay those bills.
If the amount needed is higher than expected, your escrow account can come up short.
What Is an Escrow Shortage?
An escrow shortage happens when there isn’t enough money in your escrow account to cover the upcoming property tax or insurance payments.
For example, suppose your lender estimated that you would need $6,000 for property taxes during the year.
You paid into escrow based on that estimate.
But your actual property tax bill ends up being $6,600.
That $600 difference creates a shortage.
Your mortgage servicer may then increase your monthly payment to:
- Make up the shortage, and
- Collect enough for next year’s expected bills.
Why Can This Happen in Texas?
One common reason is that your property tax bill was higher than the amount your mortgage servicer originally estimated.
That can happen because of:
- A higher taxable value
- Changes in exemptions
- Changes in local tax rates
- Changes to your property tax bill
- Previous escrow estimates being too low
It’s important to remember that an escrow shortage doesn’t necessarily mean your mortgage company raised your property taxes.
Your mortgage company is collecting money to pay the tax bill. The actual property tax is determined by the applicable taxing entities.
Does an Escrow Shortage Mean Your Property Taxes Increased?
Not necessarily.
An escrow shortage means your escrow account didn’t have enough money to cover the bills it was designed to pay.
Your property tax bill may have increased, your insurance may have increased, or the original escrow estimate may simply have been too low.
That’s why it’s important to look at your actual property tax statement instead of assuming the entire payment increase is a property tax increase.
Why Does My Monthly Payment Increase So Much?
Your servicer may spread the shortage across several months.
For example:
$1,200 shortage ÷ 12 months = $100 extra per month
Your payment could therefore increase by $100 per month just to repay the shortage.
Your required monthly escrow amount may also increase if your servicer expects your property taxes to remain higher.
What Should You Check?
If your mortgage payment suddenly increases, review your escrow analysis and compare it with your property tax information.
Look at:
✔ Last year’s property tax bill
✔ This year’s property tax bill
✔ Your taxable value
✔ Your exemptions
✔ Your escrow analysis
✔ Homeowners insurance amount
This can help you determine where the increase actually came from.
What If You Think Your Property Value Is Too High?
This is where property owners should pay attention.
Your mortgage servicer doesn’t determine whether your property is correctly valued for tax purposes.
If your property is overvalued, that can contribute to a higher property tax bill, and potentially a higher amount your lender needs to collect for escrow.
Reviewing your appraisal and challenging an incorrect valuation may help reduce your future property tax burden.
Don’t Confuse These Two Numbers
It’s important to separate:
Property Tax Bill:
What you owe the taxing entities.
Mortgage Payment:
What you pay your mortgage servicer, which may include principal, interest, homeowners insurance, and property taxes through escrow.
An increase in your mortgage payment doesn’t automatically mean your mortgage interest rate or property tax rate increased.
Final Thoughts
An escrow shortage can be confusing, especially when your monthly mortgage payment suddenly jumps.
Before assuming something is wrong, look at your escrow analysis and your actual property tax bill.
Understanding what caused the increase can help you determine whether the issue is your property taxes, insurance, escrow estimate or a combination of factors.
