Once a year your lender sends a page packed with numbers. Most of it is noise. Four lines really matter.
What the statement is for
RESPA (the Real Estate Settlement Procedures Act) requires your servicerThe company you actually send your payment to.Click to open the full glossary. to send an escrow analysisThe yearly check that resets how much escrow you pay each month.Click to open the full glossary. each year. It sets what went into your escrow against what went out for property taxes and homeowners insurance. Then it projects what next year will cost. That projection sets your new monthly payment.
The four sections to look for
- Account history. A month-by-month list of money in and money out. Money in is your payments. Money out is your tax and insurance bills. Your statement calls those payouts disbursements. One that ran higher than planned is the usual cause of a shortage.
- Projected activity. What your servicer plans to collect and pay out next year. It is projected from your most recent tax and insurance bills. This is the number that sets your new payment.
- The cushion. The spare cash your lender has to hold. By law it can be no more than two months of bills.
- Your new monthly payment. What really changes on your next bill. The loan part tends to hold. The escrow part is the one that moves.
Compare last year's projected disbursements (from last year's statement) to this year's actual went out. A big gap tells you why your bill moved. It is a tax increase, an insurance increase, or both.
Shortage or surplus: what your statement is telling you
If the account ran below the required minimum, you have a shortageYour escrow ran short, so your payment goes up to catch up.Click to open the full glossary., and you'll typically be offered the choice to pay it as a lump sum or spread it over the next 12 payments. If the account holds more than $50 above the cushion, you have a surplusYour escrow over-collected, so you get money back.Click to open the full glossary., and your servicer must either refund it or credit it toward future payments. They cannot simply keep it.
"A big gap between last year's projection and this year's actual costs tells you exactly why your payment moved."
Three numbers worth double-checking
- The tax amount. Check it against the real bill from your county. Now and then a lender uses a figure that is a year old.
- The insurance amount. If you switched carriers or your premium changed mid-year, make sure the new figure is reflected, not the old one.
- The cushion math. It should never exceed 1/6 (two months) of your projected annual disbursements. If it looks larger, it's worth a call to your servicer.
Run your own numbers through our free escrow shortage calculator before your statement even arrives, so a payment change is never a surprise.
One statement a year is easy to read. The hard part is seeing a tax increase or an insurance increase coming before it lands. We watch both all year.
Never be blindsided by a payment change again
CasaCrow monitors your escrow balance and local tax trends year-round.
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