Why Monitoring Your Escrow Account Matters More Than You Think
As a homeowner, it’s easy to assume that once your mortgage payment is set up, everything behind the scenes just works. After all, your lender collects money for taxes and insurance each month through your escrow account—so what could go wrong?
The truth is: escrow accounts aren’t “set it and forget it.” Monitoring them regularly can save you from surprise bills, coverage gaps, and even serious financial stress.
What Is an Escrow Account, Really?
Your escrow account is where a portion of your monthly mortgage payment is held to cover large, periodic expenses—primarily property taxes and homeowners insurance. Your lender pays those bills on your behalf when they come due.
For many homeowners, this feels reassuring. But escrow accounts depend on accurate information, timely payments, and clear communication between multiple parties—your lender, your insurance company, and your local tax authority. When one piece changes, things can slip through the cracks.
A Real-Life Cautionary Tale
A client of mine recently learned this lesson the hard way. They received a letter in the mail that we initially thought may be a scam, but upon further investigation, they discovered that their homeowners insurance company was purchased by a new insurance provider. During the transition, billing systems changed, account numbers were updated, and communication became… less than clear. Somewhere along the way, the escrow payment didn’t get applied correctly.
The result? The insurance policy was dropped due to non-payment.
My client had no idea. Their mortgage payment stayed the same, and no one called to say there was a problem. They only found out later—after they were unknowingly uninsured for a period of time.
Thankfully, nothing catastrophic happened during that gap, but it was a scary realization. Reinstating coverage took time, money, and a lot of phone calls.
Timing Matters (And It’s Different for Everyone)
Another reason to keep an eye on escrow is that your bills don’t all come due at the same time.
For example:
My property taxes are paid in September and October
My homeowners insurance is paid in April
That means escrow balances fluctuate throughout the year. If your lender underestimates costs, you could face:
An escrow shortage
A sudden increase in your monthly payment
A request for a lump-sum catch-up payment
By knowing when your big bills are paid, you can better understand whether your escrow balance makes sense at any given time.
Why Escrow Issues Happen
Escrow problems aren’t usually caused by negligence—they’re caused by changes:
Insurance premium increases
Tax reassessments
Insurance companies merging or being acquired
Policy renewals with updated billing details
Your lender doesn’t always get real-time updates unless someone flags the issue.
How to Protect Yourself
You don’t need to be an escrow expert—just an informed homeowner. Here are a few simple habits that go a long way:
Review your annual escrow analysis
Don’t just file it away. Look for changes in payments, shortages, or surpluses.Open mail from your insurance company
Even if you think escrow handles it. Cancellation or renewal notices often go directly to you.Confirm coverage annually
A quick call to your insurance agent can confirm your policy is active and paid.Check timing
Know which months your taxes and insurance are paid so you can spot red flags.