What is an escrow shortage?

An escrow shortage is when you don’t have enough money in your escrow account to cover the actual amount needed to pay your bills. Money for the escrow account comes directly from your monthly mortgage payment. How much of the money you pay that goes to your escrow account is determined by your yearly escrow analysis.

Can escrow shortage affect mortgage payments?

When the funds in your mortgage escrow account are insufficient to meet the rising costs of property taxes and homeowner’s insurance, you face an escrow shortage. This situation can result in higher monthly mortgage payments to compensate for the deficit. Can I choose how to repay my escrow shortage?

What happens if escrow is short?

When your escrow account is short by a certain amount, the resulting escrow shortage payment is twice that amount. This is because one-half of the payment goes toward the negative escrow balance, and the other half covers a future payment to prevent a shortage from taking place the following year.