Why Did My Mortgage Escrow Account Payment Increase?

Although a mortgage escrow account is technically not insurance, we’re going to discuss it here because one of the normal components of the escrow account is your Ohio homeowners insurance premium. And when the escrow payment increases, chances are good the homeowners insurance is one of the reasons why.

The two most common reasons your mortgage escrow account payment increased

  • Increase in property taxes
  • Increase in Ohio homeowners insurance premium

Your monthly house payment (principal + interest) once established doesn’t change, unless you re-finance. And since most people don’t re-finance frequently, the most likely reasons for the increase are either an increase in property taxes, an increase in homeowners insurance or both.

Let’s do a quick mortgage escrow account review so this makes more sense

When an escrow account for your home mortgage is set up, your monthly mortgage payment is typically comprised of the following three items: house payment (loan principal + interest), property tax and homeowners insurance.

 Obviously, if you’ve asked the bank to pay your property tax and homeowners insurance on your behalf (the point of the mortgage escrow account), the money needs to be there to do so. 

Once the full year goes by, an annual statement arrives that shows you a running balance, what payments were made from the account and where the escrow ended up. If the bank paid out more than what they collected from you over the year, they can elect to increase your future escrow payment to make up the difference. The new payment would be displayed on the statement.

Of the two reasons mentioned earlier, the more common is an increase in homeowners insurance premium

Why would the homeowners insurance premium increase? We’ve listed a few reasons below. You can read Top Seven (7) Reasons Your Homeowners Insurance Premium Increased for additional reasons.

Inflation guard– Most homeowners insurance policies include an inflation guard. What this means is that the amount of coverage on your house will increase at a set percentage every year so as to keep pace with rising costs of construction. This is actually a good thing- the worst thing you want to happen is you’re penalized on a claim because you don’t have enough insurance on your house (meaning you get less than expected- and yes, it DOES happen). So let’s say the inflation guard is 2%. Your coverage amount would increase 2% each year. It stands to reason that your premium would follow suit. More coverage equals more premium. 

General rate increase- Within the past 10 years, homeowners insurance premiums has increased significantly. You can blame Mother Nature, as catastrophic weather events have contributed to the problem. Lots of dollars (billions) in claims paid means a rebuilding of that pot to pull claim money from. We’ve seen an average of 10-15% from our companies. That’s GOOD. I’ve heard horror stories from other agents in hard hit states- 50, 60 even 70% homeowners insurance rate increases.

And what if you want to switch Ohio homeowners insurance and you have a mortgage escrow account? We’ve made it easy- get step by step instructions, then contact us!

Ready to talk about what we can do for your Ohio homeowners insurance? Call us at (937) 592-4871 or fill out the form below.

Let us help get you a great quote today!

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Are you ready to save time, aggravation, and money? The team at Alan Galvez Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

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