The One Mortgage Statement Many Homeowners Ignore (and Why You Shouldn’t)
It’s easy to toss it aside. Your annual escrow statement arrives unannounced, just another ping on your mobile phone or an envelope tucked among the junk mail you usually toss in the trash.
But this is one notification you shouldn’t ignore. While nearly half of homeowners believe their mortgage payments are fixed, 80% of mortgage holders have escrow accounts, which adjust for changing taxes and insurance costs. [1]
Your annual escrow analysis statement tracks every dollar that came into and went out of your account during the preceding 12 months, and it projects what you'll owe in the year ahead. It’s vital information for managing your mortgage and finances.
What does your escrow account actually do?
Escrow accounts provide for the timely payment of taxes and insurance on your home. Your servicer (the company that manages your loan) collects 1/12th of the annual cost of property tax and homeowners insurance as part of your regular mortgage payment, then pays those invoices as they come due.
If property taxes are $5,000 and homeowners insurance is $1,000 for a total of $6,000, you’ll pay $500 into escrow as part of your monthly mortgage payment. The balance will build until an outgoing payment is made.
It sounds easy enough, but servicers must make sure there’s always enough in your escrow account to cover each bill on its due date. To achieve this, they often require a “cushion” of up to two months of expenses over the minimum balance so there will be enough to pay out even if expenses have risen or if payments have been interrupted.
If you sell or refinance, you'll get back whatever is left in the account, including any cushion your servicer has been holding.
Surplus or shortage? Here's what to expect
Your annual escrow analysis provides an accounting of all funds collected and disbursed from your account and identifies any shortage or surplus amounts. If costs changed during the year, your servicer will recalculate the required cushion and payments.
If your account has a surplus, you will receive a reimbursement or credit. It’s possible your monthly payment will fall.
Unfortunately, that’s not the case for most escrow accounts. An estimated 65% of homeowners will have a shortage in 2026, with an average deficit of $2,157.[2] Much of that shortfall stems from rising property taxes, which increased an average of 7.4% last year. Average homeowners insurance premiums rose 6.6% over the same period. [3]
If your account has a shortage, you will have three options for making up the difference:
• Paying it in full with a one-time payment.
• Paying it over the next 12 months as an addition to your monthly mortgage payment.
• Making a partial payment upfront and paying the balance over the next 12 months.
No matter which option you choose, your lender will not charge interest on the shortage balance.
Four steps to take when your statement arrives:
1. Check it for accuracy. If you have any doubts, compare the tax and insurance payments on your escrow analysis to statements you received from the taxing authority and insurer.
2. Review your options for receiving a reimbursement if you have a surplus or making up the difference if you have a shortfall. You may not need to take any action if you choose the servicer’s default procedure, but you’ll want to be certain so you won’t encounter any surprises.
3. Update any automatic payments. If you pay your mortgage through a bank autopay rather than your servicer’s system, make sure the amount reflects your new monthly total. Otherwise, your payment may leave your account short, or you could overpay without realizing it.
4. If you haven’t reviewed your insurance recently, take the opportunity to do so now. Insurers often apply standard increases annually, and if you’ve had your policy for several years, you may be paying more than a new customer would for the same coverage.
Your escrow statement may look complicated at first glance, but it’s your yearly check-in on your home’s finances. A thorough review can help you catch surprises before they become problems or, at a minimum, confirm that everything is still running smoothly. Think of it as a few minutes well spent for your peace of mind and your financial health in the year ahead.
Sources:
Loreta, “Escrow Confusion and Rising Costs: Why Homeowners Are Facing Unexpected Mortgage Increases,” September 25, 2025.”
CNBC, "Why your 'fixed' mortgage payment keeps going up," May 17, 2026.
ICE Mortgage Monitor, March 2026.