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I bought my first home last summer, and since then my mortgage has changed hands several times. Most recently, the bank that owned it was acquired by another institution about four months ago.

Since then, my monthly payment has gone up by nearly 50% due to a sudden increase in the escrow amount. I was already withholding to pay my property taxes, and even if that amount was previously zero the amount of the increase alone is more than the tax rate per month.

Because I'm still new to the ins and outs of home ownership finance, I'm wondering what information to request or what recourse I might have to try and fix this seemingly erroneous recalculation. Fortunately I can afford it until they recalculate again in July, but it's still a significant amount of money for me.

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    Have you asked the bank for an explanation? What did they say?
    – Ben Miller
    Jan 25 at 14:59
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    If your house has increased in value (which it may have simply by fact of a new mortgage holder requesting an updated valuation), then your estimated tax will have gone up even if the tax rate has not changed. Escrow payments are re-evaluated on at least on an annual basis to account for changes in expected payments, to make up for shortfalls due to payments made above previous estimates, etc. Perhaps banks can do so upon acquiring a new mortgage as well.
    – chepner
    Jan 25 at 15:05
  • @chepner That explanation makes sense but I would find it hard to believe that my taxes had nearly tripled in the same year. I will try to get a clearer explanation from them and update this question accordingly.
    – hunsbct
    Jan 25 at 15:07
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    The tax itself may not have tripled. You may have been underpaying for quite some time, so your increased escrow payment is not just to cover the new expected tax, but to make up for the shortfall in your escrow balance resulting from the previous underpayments.
    – chepner
    Jan 25 at 15:10
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    Note that if you haven't asked for an explanation you can't say that it is "inexplicable". Unexpected would be a better description.
    – keshlam
    Jan 25 at 18:13

1 Answer 1

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Just to make this an Answer rather than a comment:

  1. Ask the bank. No need to guess.

  2. If something the escrow is paying for, like real estate taxes or insurance, has gone up the escrow portion of your payment will be adjusted to cover that cost. The adjustment may not be synchronized to the change; the bank may let the escrow account run a bit behind and then adjust the payment so it will catch up again.

(I was allowed to decline escrow and pay the insurance and tax bills myself as they came in, perhaps because I was borrowing only half the cost of the house. If you're scrupulous about paying bills on time, I think that's worth considering; it makes the cash flow easier to understand and gives you some warning about how much cost will remain when you have paid off the mortgage ... and encourages you to think about whether you have the best insurance for your current needs.)

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  • Yeah, I've had a huge escrow jump from the tax situation. When we bought the land the tax guys were behind and at first we were paying tax as if it was still vacant land (we bought new construction.) When the tax guys caught up the result was obvious.
    – Loren Pechtel
    Jan 25 at 22:42

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