Your monthly mortgage payment is made up of three parts: principal, interest, and escrow. Your principal and interest are likely on a fixed rate and won’t change. Your escrow payments, however, will likely vary on a yearly basis.
An increase in your escrow payments could be due to tax and insurance rate fluctuations. Other events might increase your payments as well. For example, the value of your home may increase, pushing up your property tax bill. Or, your insurance bill may increase if you remodel and add an extra bedroom to your home. What’s more, increases in taxes and insurance might leave your account underfunded, causing an increase in your escrow payment to make up for the shortage.
Because ServiceMac can't control these variables, we can't prevent changes in your escrow payment amount. But, we'll notify you promptly when your payment changes and take the following actions to make sure your escrow account runs smoothly:
- Determine your escrow payment amount through a yearly escrow analysis
- Recognize and notify you when your account has a shortage
- Recognize and notify you when your account has a surplus
What if I have a surplus?
Although it might seem odd, your payment can increase even if your account has a surplus and you receive a refund. Here's why.
We're required to calculate your monthly escrow payment by:
- Estimating your total property tax and/or insurance expenses for the upcoming year, then
- Dividing that amount by 12
So, if your tax or insurance bills are higher in the upcoming year than they were last year, your monthly escrow payment will go up. And here's what some find confusing—we must calculate your monthly payment this way regardless of the balance in your escrow account at the time we make this calculation.
This means that you may start the upcoming year with enough funds in your escrow account such that, after we take your monthly payments and apply them to your increased expenses, you still end the escrow year with a surplus.
💡 Tip: If you have a surplus of more than $50, we are typically required to refund you directly rather than apply the surplus to your account.