Definition
The opposite of a shortage—your escrow account has more than needed to cover taxes and insurance. The lender must refund the excess to you, usually in a check after the annual review.
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An escrow surplus occurs when the lender's annual analysis reveals that the current escrow account balance exceeds what is needed to cover the upcoming year's taxes and insurance. This can happen when property taxes or insurance rates decrease, or when the initial estimate was higher than actual costs. Under federal law, lenders must refund surpluses exceeding a certain threshold (typically 50 dollars) to the borrower.
Pro Tip
Request a refund of any escrow surplus rather than letting the lender keep it. This puts money back in your pocket.
Example
After a property tax reassessment, taxes decreased from $3,000 to $2,700 annually. The escrow analysis revealed a $450 surplus, which the lender refunded to the borrower as a check.