mortgage payment changes

What to plan for when your payment changes due to your escrow account.

If you have an escrow account on your mortgage loan your monthly payment can change as the lender adjusts to pay for taxes and insurance that can change year to year.

Sometimes your payment can go down if the lender has too much in the escrow account. This has happened on two of my loans this Spring. While I appreciate the fact that my payments are lower, I'm also consious that my property taxes have risen this year.

How can this be that my payments go down but my taxes have risen? Lenders are strictly regulated as to how much they can hold in their escrow accounts and have to give back any overages. They have to base their escrow account amounts on what they paid out last year and don't have the tax information for the current year. Of course at year's end when taxes are due they'll notice the escrow deficiency and raise your payments higher than they were before to cover the deficiency last year and anticipating the next year.

So if your payments drop as a result of the escrow accounts be sure to know what taxes are to be paid at the end of the year so that you can put a little extra away and don't get surprised by a payment increase.