Are You Prepared for Escrow Changes?
Have you ever received a surprise increase in your mortgage payment due to escrow adjustments? Many homeowners don’t realize how flood insurance changes can impact their escrow account, sometimes leading to unexpected bills months later.
If you’ve recently switched flood insurance providers or experienced a rate increase, you may be wondering:
- How does flood insurance impact my escrow account?
- Why do escrow payments sometimes change months after I switch policies?
- Can I avoid a sudden, unexpected bill from my mortgage company?
In this article, we’ll break down how escrow accounts work with flood insurance, when you should expect changes, and how to stay ahead of any adjustments.
What is an Escrow Account and How Does It Work?
An escrow account is a financial arrangement set up by your mortgage lender to ensure your property-related expenses (like taxes and insurance) are paid on time. Instead of making individual payments, a portion of your monthly mortgage payment is allocated to escrow.
Your mortgage company reviews your escrow account annually, adjusting it based on property taxes and insurance premiums. This means:
- If your flood insurance premium increases, your mortgage payment may rise months later when the review happens.
- If your premium decreases, you could be due a refund or lower monthly payments.
- Changes are not immediate—which is why many homeowners get caught off guard by an unexpected bill.
How Flood Insurance Affects Your Escrow Account
1. Timing of Escrow Reviews
Escrow accounts are usually reviewed annually based on your loan anniversary date. If you change flood insurance policies mid-year, your mortgage lender may not review your escrow until months later.
Example: You switch flood insurance providers in January, but your lender doesn’t review escrow until November. That’s nearly a full year before your mortgage payment adjusts!
2. Unexpected Backdated Increases
Many homeowners assume their monthly mortgage payment will adjust immediately when they change flood insurance providers. However, this isn't the case.
Scenario:
A homeowner switched policies, thinking they were saving money. But when their lender reviewed the escrow account six months later, they discovered they had been underpaying the escrow balance. As a result, their mortgage payment jumped by $400 per month, and they had to pay back six months’ worth of the shortage.
3. How to Stay Ahead of Escrow Changes
To avoid a sudden payment increase, take these proactive steps when changing your flood insurance:
Notify your mortgage company immediately when you switch providers.
Request an early escrow review to see how much your new premium will impact your account.
Prepare for potential adjustments—if your new flood insurance policy is more expensive, start budgeting now.
Monitor your escrow statements to check for changes before they become a financial burden.
What to Do If Your Escrow Account Increases Unexpectedly
If you receive a higher-than-expected mortgage payment due to an escrow adjustment:
1️⃣ Review your lender's escrow analysis – Ensure the calculation is accurate.
2️⃣ Ask about payment plan options – Some lenders allow gradual repayment of escrow shortages.
3️⃣ Check for flood insurance discounts – Elevation certificates or mitigation efforts can lower your premium.
4️⃣ Consult with a flood insurance expert – If your premium has spiked, there may be options to reduce it.
Next Steps: Stay in Control of Your Flood Insurance and Escrow
Escrow accounts can be confusing, and flood insurance changes can have unexpected financial consequences. But by staying informed and proactive, you can avoid surprise mortgage increases and take control of your payments.
If you have questions about:
🔹 How your flood insurance premium is impacting your escrow
🔹 Ways to lower your flood insurance costs
🔹 Steps to prevent unexpected mortgage increases
📞 Call us today at 205-451-4294, or visit FloodInsuranceGuru.com for expert guidance.
📺 Want more flood insurance insights? Subscribe to our YouTube channel and follow us on Facebook at The Flood Insurance Guru for daily flood education videos!
Topics:
