You are not alone if your mortgage payment went up and you were not expecting it.
This is one of the most common calls we get at Flood Insurance Guru.
A homeowner gets a notice from their lender, sees their monthly payment jump, and immediately assumes something went wrong. In many cases, the cause is tied directly to flood insurance and how it is handled through escrow.
The confusion usually comes down to one simple issue. Most people do not fully understand how escrow works.
An escrow account is set up by your mortgage company to pay property-related expenses on your behalf.
This typically includes:
This means your monthly payment is not just your loan. It is a combination of principal, interest, taxes, and insurance.
If your property was newly identified in a high-risk flood zone, your lender may now require flood insurance.
This often happens due to:
When flood insurance is added for the first time, your escrow account must now cover that cost. That means your monthly payment increases.
This can be due to:
If your premium increases, your escrow account needs more money to cover the higher bill. Your lender adjusts your monthly payment to make up the difference.
If your escrow account did not collect enough to cover your flood insurance premium last year, you now have a shortage.
Your lender will:
If your lender believes you do not have adequate flood insurance, they can place a policy on your property.
This is called force placed insurance.
It is usually:
It depends on the premium and how your escrow is structured.
For example:
Your payment includes escrow for taxes and insurance. If flood insurance was added or increased, your total payment will go up.
Yes. If your property is in a high-risk flood zone, lenders are required to ensure flood insurance is in place.
An escrow shortage happens when your account does not have enough funds to cover your insurance or taxes. Your lender increases your payment to recover the difference.
Only if your lender no longer requires it. If it is mandatory, removing it can lead to force placed insurance, which is usually more expensive.
If your mortgage payment increased, there is always a reason, and flood insurance is one of the most common ones we see.
Most homeowners feel frustrated because the change is unexpected.
If your payment went up and you are not sure why, your next step is simple.
When it comes to flood insurance, the difference between the right policy and the wrong one can cost you every single month. Click below and start by getting a free policy review.