Escrow Calculator
Your taxes went up a little and your payment went up a lot. This shows why, and how much of the increase is temporary.
What the account was funded on
The new bills
A reassessment after a purchase is the usual cause. The property is reassessed at what you paid, and the old owner’s tax bill — which is what the account was funded on — disappears.
Assumptions
Escrow rises by
$243.75
From $525.00 to $768.75 a month
Temporary share
53.85%
Falls to $637.50 once the shortage is repaid
Most of this increase goes away. Your bills rose $112.50 a month, but the payment rises $243.75 because you are repaying the shortage at the same time. After 12 months it drops back to $637.50.
| Deposit before | $525.00 |
|---|---|
| Deposit after | $637.50$112.50 more, from the bills alone |
| Cushion required | $1,050.00 → $1,275.00 |
| Shortfall from higher bills | $1,350.00 |
| Shortfall from the larger cushion | $225.00 |
| Total shortage | $1,575.00 |
| Catch-up per month | $131.25 |
| Escrow during catch-up | $768.75 |
| Escrow afterward | $637.50 |
| Collected at closing | $1,575.00 |
Estimates only. Servicers differ in how they time an analysis, how they apply a surplus, and how long they spread a shortage. Your annual escrow statement is the authority — this explains what it is telling you.
Your payment rose twice, for two different reasons
An escrow analysis lands once a year and it is the most reliably alarming piece of post to arrive from a mortgage servicer. Taxes went up $1,100. The payment went up by what feels like far more than that. The letter explains it in language nobody reads twice, and the usual conclusion is that something has gone wrong.
Nothing has. The payment rose twice, for two separate reasons that land in the same month.
The first is straightforward: the deposit resets. Your account has to collect the new annual figure over twelve months, so on the default scenario the monthly deposit goes from $525 to $637.50 — up $112.50. That part is permanent, and it is simply what the higher bills cost.
The second is the part nobody expects. For the year just ended, your account was collecting on the old figure while paying out on the new one. That gap — $1,350 here — is a real shortfall the account has to make up. On top of it, the required cushion is a fixed number of months of deposits, so when deposits rise the cushion has to grow too: another $225. Total shortage: $1,575.
Servicers typically spread that over twelve months, which adds $131.25 a month on top of the higher deposit. So the escrow portion of your payment rises by $243.75 — more than double the increase in the underlying bills — and about 54 percent of that increase is temporary. After twelve months it drops back to $637.50.
Knowing which half is which is the whole point. A payment that rose $244 and stays there is a budget problem. A payment that rose $244, of which $131 disappears in a year, is a cash flow problem with a known end date. Those call for different decisions.
Two things worth doing when the letter arrives. Ask whether you can pay the shortage as a lump sum — most servicers allow it and few volunteer it, and it takes the catch-up out of the payment immediately. And if the increase followed a purchase, expect it: the property was almost certainly reassessed at what you paid, while the account had been funded on the previous owner’s bill. That first reassessment is the biggest escrow shock most owners ever see, and it arrives about a year in.
Methodology
- Monthly deposit = (annual taxes + annual insurance) ÷ 12.
- Required cushion = cushion months × monthly deposit. RESPA caps this at one sixth of annual disbursements, which is two months.
- Disbursement shortfall = new annual total − old annual total. The gap between what was collected and what was paid out.
- Cushion shortfall = new required cushion − old required cushion.
- Total shortage = the two together, repaid over the spread period. Payment during catch-up = new deposit + monthly repayment.
The model assumes the account held exactly its required cushion at the start of the year and that deposits ran at the old rate throughout. Real statements differ in detail — disbursement timing within the year, when in the cycle the analysis runs, whether a surplus is refunded or credited — but the structure of the increase is the same, and it is the structure that explains the number.
Excluded: mortgage insurance collected through escrow, mid-year supplemental tax bills, and servicers who spread a shortage over something other than twelve months. Set the spread period above to match your own statement.
Frequently asked questions
- Why did my mortgage payment go up more than my taxes did?
- Because two things happen at once. Your monthly deposit resets to the new annual figure, and separately you repay the shortage that accumulated while deposits were still sized on the old one — plus the larger cushion the new figure requires. The catch-up is usually spread over twelve months, so for a year the payment carries both. On the default scenario the bills rose $112.50 a month and the payment rose $243.75.
- What is an escrow cushion?
- A reserve the servicer holds so the account does not run dry between deposits and disbursements. RESPA caps it at one sixth of annual disbursements — two months. It is your money and it stays in the account; when the bills rise, the required cushion rises too, which is part of why a shortage appears.
- Will my payment come back down?
- The catch-up portion will, once the shortage is repaid. The higher deposit will not — that reflects genuinely higher bills. On the default scenario the payment settles from $768.75 back to $637.50 after twelve months, which is still above where it started. Knowing which part is temporary is the difference between a manageable year and a panic.
- Why does this happen so often after buying a house?
- Because the property is usually reassessed at what you paid. The escrow account was funded on the seller's tax bill, which may reflect an assessment from years ago plus whatever exemptions they held. The first reassessment after a sale is frequently the largest escrow shock a new owner experiences, and it lands about a year in.
- Can I pay the shortage in a lump sum instead?
- Usually yes, and it is worth asking. Paying it outright removes the catch-up from the monthly payment immediately, so your payment goes to the new steady-state figure right away. Servicers generally offer the choice but often default you to the spread rather than asking.
- Can I waive escrow altogether?
- Some lenders allow it, typically at 20 percent equity or more and sometimes for a small fee or rate adjustment. It means paying taxes and insurance yourself in lump sums, which requires the discipline to set the money aside. It also removes the annual surprise, because you see the bills directly rather than through a recalculated payment.
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