Escrow Analysis Update

I posted about how one of our houses updated the escrow calculation and claimed our new mortgage payment needed to be $185 more than it had been to cover an escrow shortfall. Our escrow balance was negative, so it wasn’t a surprise that the amount was increasing, but that seemed to be a drastic increase. Most of what I said was right, but I did the increasing math incorrectly. The concept was there, but not the details.

Here’s the current escrow analysis from the mortgage company. It’s similar to what I did on my own. I knew that the new escrow amount to cover just what we owe in the year is $199.25, which is the same. I knew that there would be a shortfall in May of $256.89. This next step is where I was wrong in my calculation.

I took $256.89 and divided that specific shortfall by 12 months to come up with $16.60. Instead, I needed to take that shortfall and add it to the required balance of 2 months worth of the escrow payment. Therefore, $199.25*2+$256.89=$655.39. Take that number and divide by 12 to get the monthly payment to cover the shortfall, which comes to $54.62 (rounded).

The new payment is the new base amount plus the shortfall coverage. So our payment actually increases by a total of $96.95 because our previous escrow payment was only $156.92.

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