Mortgage FAQ: What Happens I Have a Shortage or Overage in My Escrow Account?

"I RECEIVED A NOTICE STATING THAT MY ESCROW ACCOUNT IS PROJECTED TO HAVE A SHORTAGE AND I NEED TO MAKE A PAYMENT TO MY LOAN PROVIDER. WHAT DOES THIS MEAN AND WHY DID THIS HAPPEN?”

When you started with your new mortgage, an escrow account was set up to manage payments of property taxes and homeowner’s insurance. Since the amount paid on taxes and insurance can fluctuate from year to year (or quarter to quarter, in some cases), the account may fall short of the required amount or it may have an overage. If your lender has underestimated your escrow payments, they may request you send an additional payment to make up the difference.

In the event you are paying too much into your escrow account, your lender may release the overage amount directly to you. With some loan providers, the shortage amount can be rolled into your monthly payment—or deducted from your monthly payment, if there’s an overage—over a set amount of time (usually six or twelve months).

When you sell your home or refinance your mortgage, the amount you have in your escrow account will be credited to you at closing. Generally, the chances of you having either a shortage or an overage are about even, so you shouldn’t worry about having to make a large payment each year.

For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.

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