There are usually only two reasons why your mortgage escrow payment increases
- Increase in property taxes
- Increase in Ohio homeowners insurance premium
Your house payment, once established, doesn't change (unless you re-finance, of course). But that is seldom the case. So the likely reason is an increase in your property taxes or an increase in Ohio homeowners insurance premium.
Quick Mortgage Escrow Review
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, property tax and homeowners insurance. Read the basics of a mortgage escrow account in a prior article.
Obviously, if you've asked the bank to pay your property tax and homeowners insurance on your behalf, 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 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. The new payment would be displayed on the statement. This is what my own bank does for my mortgage every year.
Of the two reasons for the mortgage escrow increase, the more common is the increase in homeowners insurance premiums
Here's two big reasons for homeowners insurance premium increases:
- Most homeowners insurance policies have an inflation guard as part of the policy. 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 inflation. This is actually a good thing- the worst thing you want to happen is you're penalized on a claim (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 5 years, homeowners insurance 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. Since insurance companies investments have tanked, that means premium is about the only way you'll replenish the fund to pay future claims. We're seeing an average of 15% from our companies. That's GOOD. We've run into several where the average is 30-40%.
For more reasons why home insurance premium increases, read our article. We list SEVEN very common reasons.
So if your mortgage escrow account increases., chances are good that either your property tax has increased OR your homeowners insurance premium has increased. I'm betting on the homeowners insurance premium.
Still have questions? Need further clarification? Want to discuss your own Ohio homeowners insurance and how we can help you? Call us or request your quote today.