Property taxes and insurance are essential expenses for homeownership. 

Some homeowners prefer managing these payments themselves, while others choose to include them in their monthly mortgage payment as an escrow. 

Since property taxes and insurance premiums can fluctuate, that also means your monthly mortgage payment could change as well following an annual mortgage escrow analysis. 

UnitedOne Credit Union’s Local Home Loan Experts explain the process of escrow analysis on the latest episode of the At Home on the Lakeshore podcast. 

Convenience is a key reason why many homeowners opt for an escrow account, which handles these payments on their behalf. However, it’s important to pay attention to your mortgage payment, especially following an escrow analysis. 

“Property taxes can go up or down,” said UnitedOne Mortgage Specialist Kari Johnsrud, NMLS # 441414. “We all wish they would go down every year, but they don’t. Sometimes they go up, and every year we have to do what’s called an escrow analysis to figure out how much you need to pay.” 

Escrow analysis involves reviewing the mortgage account to ensure it has sufficient funds to cover upcoming expenses. UnitedOne typically conducts this process in March with adjusted payments going into effect May 1. 

“You get a letter in the mail, and it gives you a snapshot of your balance after those taxes or home insurance are paid. This helps determine if there’s enough money in your account,” said UnitedOne Mortgage Specialist Julie Peot, # 441412. 

“In the last couple of years, a lot of communities are doing tax assessments. So, with those assessments, taxes have gone up, leaving escrow accounts short. … The shortage gets reanalyzed, and we send you a letter explaining what’s needed.” 

To address shortages, mortgage lenders may spread the amount owed over 12 months, increasing the monthly escrow portion of the payment. Or you may opt to pay the shortage as a lump sum to avoid increases to your monthly payment installment. 

“If we need, say, $500 more, they’ll divide that $500 by 12 and increase your payment by $41.67 each month to cover that difference,” Johnsrud said about making up for an escrow shortage by recalculating monthly payments. 

Reviewing an escrow analysis letter and being aware of possible changes are things homeowners need to consider when budgeting to have sufficient funds. 

On the flip side, escrow accounts aren't always about increases.  

“If your property values come down or if you change homeowners insurance agents to get a better deal, your payments may go down,” Johnsrud said. “It can go in either direction.” 

Excess funds of $50 or more are typically refunded to homeowners, while smaller amounts roll over for future expenses. 

To avoid surprises, homeowners should remain proactive.  

“I know a lot of times when your mortgage is set up and it's out for 30 years, you just kind of forget about it,” Peot said. “You just know; yes, the payment is going to happen. Yep, the taxes automatically get paid. Maybe just start looking at those bills. How did they compare from the previous years to this year?That kind of gets you ready.” 

Monitoring changes in taxes and insurance premiums can help homeowners anticipate adjustments and plan accordingly. 

Ultimately, mortgage escrow analysis ensures that homeowners remain on track with their obligations. While adjustments may be inconvenient, they reflect real-world changes in taxes and insurance costs.  

“It’s not for no reason at all,” Johnsrud said. “If your property values are on the rise, you’re going to have to expect that the taxes will go up also.” 

Whether you’re looking to buy your first home or tap into the equity of your current house to do a renovation, UnitedOne’s team of Local Home Loan Experts? are your trusted source in Manitowoc and Sheboygan for all your home loan needs. 

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