Definition
Each year, your lender reviews your escrow account to make sure there's enough money set aside for taxes and insurance. If costs have increased, your payment goes up. If they decreased, you might get a refund.
Where you’ll meet it
I own a home. Now what?
See it in Buying my first home · Step 7About this term
After closing, the buyer's lender manages an escrow account for property taxes, homeowners insurance, and possibly HOA fees and mortgage insurance. Each year, the lender conducts an escrow analysis to determine if the current monthly escrow payment is sufficient or if an adjustment is needed. If taxes or insurance increased, the monthly payment may increase; if decreased, the monthly payment may decrease. Lenders must provide analysis statements and allow borrowers to dispute the findings.
Pro Tip
Review your annual escrow analysis carefully. If taxes or insurance projections seem wrong, contact your lender with current bills.
Example
The lender's annual escrow analysis determined that the property taxes had increased by $600 annually. To maintain adequate escrow reserves, the buyer's monthly payment increased by $50 to cover the additional tax burden.