I'm worried about escrow? Why can my payment change after closing?

Why does my escrow payment change after closing?

You're concerned about your escrow payment changing after closing, even though you locked in your mortgage rate. Escrow covers property taxes and homeowners insurance, and these costs can shift over time—which means your monthly payment can change even when your mortgage rate stays the same.

Escrow works like a savings account. Each month, you pay extra money along with your mortgage payment. The lender holds this money and pays your property taxes and insurance when the bills come due. The lender estimates these costs based on current tax assessments and insurance premiums, but both can change annually.

Property taxes commonly increase when local governments raise tax rates or your home's assessed value goes up. Insurance premiums can change when you renew your policy or if your insurance company adjusts rates. If your actual tax and insurance costs end up higher than the lender estimated, your escrow payment increases to cover the difference.

Your lender sends an annual escrow analysis that shows what happened with your account and any payment changes. Review this statement and compare the actual costs to what you expected. If something doesn't match what you understand about your taxes or insurance, contact your lender to walk through the numbers and explain how they calculated your new payment.