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Escrow shortage increase or refinance with an escrow waiver?
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My servicer’s annual escrow analysis raised the escrow portion of my payment from $420 to $610 per month. The notice attributes the increase to a property-tax adjustment and higher homeowners insurance, plus an escrow shortage spread over the coming year. I’m checking whether the projected tax and insurance figures match the actual bills before treating this as a valid recalculation.
At the same time, I’m considering a refinance with an escrow waiver. The proposed loan would have a lower rate, but the estimate includes closing costs, a new loan balance, and a lender charge or pricing adjustment for waiving escrow. I’d still need to set aside the full tax and insurance amounts myself, and the refinance wouldn’t necessarily fix an incorrect shortage balance on the existing account.
For anyone who has compared these options, how did you evaluate them?
- Did you request the annual escrow analysis, payment history, tax bill, insurance declarations page, and shortage calculation in writing before deciding?
- How did you compare the temporary shortage repayment with the ongoing increase caused by higher taxes or insurance?
- When calculating the refinance cost, did you include prepaid taxes and insurance, the escrow refund from the old loan, and the cost of maintaining your own reserve?
1 reply
The jump from $420 to $610 shouldn’t be evaluated as one permanent increase. I’d split it into:
- the recurring change from higher taxes and insurance
- the temporary shortage repayment, including how many months it covers
For the refinance, calculate the break-even using only genuine recurring savings after the escrow-waiver pricing adjustment, lender fees, and other transaction costs. Don’t count the old escrow refund as savings; it’s generally just a return of money already held, while the new loan may require fresh tax or insurance prepaids.
The key question is whether the proposed refinance still breaks even within the period you expect to keep the loan after excluding the shortage portion of the current payment.
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