Shocked by how high your monthly mortgage
payment went up? Here’s why it jumped
Article Courtesy of The Sun Sentinel
By Amber Bonefont
January 17, 2023
Many homeowners across South Florida are having
sticker shock when receiving notices of a shortage in escrow, after
mortgage lenders notified them that their monthly payments would be
It was the case for Kenneth Rankel, 58, and his husband when they
received a notice from their mortgage lender last week that they had a
shortage in escrow as a result of rising insurance costs, and therefore
their monthly payment would be increasing by about $323 a month.
“The insurance company sent us a notice in November that the insurance
was going up,” Rankel said. “I just wasn’t too sure how much it was
going to be.”
The couple isn’t alone. Mainly due to increasing insurance costs, and in
some cases rising property taxes, many homeowners are receiving notices
that their monthly payments will be significantly higher this year due
to a shortage in escrow.
“I probably had personally so far in the last month half a dozen calls
on what’s going on,” said Stephen McWilliam, president and broker of
Florida State Realty Group & Florida State Mortgage Group. “They don’t
understand why it happened and they just see their mortgage payment
What exactly is an escrow shortage?
A homeowner’s mortgage payment consists of two parts: the actual loan
amount (principle and interest) and the escrow portion of the bill.
The escrow payment is the amount that goes toward costs such as property
taxes, homeowners insurance and mortgage insurance, plus a little extra
as a cushion to try and make sure that the account doesn’t fall
The mortgage lender will collect the estimated amount
of property tax and insurance each month in anticipation of the yearly
“Typically the bank or servicers will send out an escrow analysis
annually. That will show you how your escrow account did last year and
whether you were escrowed enough to cover the costs of taxes and
insurances or was it just enough,” said J.C. de Ona, southeast Florida
division president of Centennial Bank.
Some years there aren’t much changes, but other years, homeowners can
receive notices of a shortage in escrow, or a notice that there aren’t
enough funds in the account to cover that amount due, because of an
unplanned increase in insurance or taxes.
Let’s say a homeowner was saving $200 a month in their escrow account
because their insurance bill was $2,400 a year. Now, when the new year
hits, the insurance policy doubled on their home and it’s now $4,800 a
Not only does the lender have to pay the $4,800 up front, they also have
to start budgeting for the perceived cost for next year as well.
“It’s almost going to be double because they were short for last year
and they have to prepare for next year. A $200 difference is going to
increase to $400 because you were short for last year,” said Craig
Garcia, president of Capital Partners Mortgage in Coral Springs.
Double increase: property taxes and insurance costs
For homeowners who received notices of escrow shortages, the most likely
reason is due to increased insurance costs.
“What I am seeing this year is the insurance costs going up,” de Ona
said. “Across the board, we are seeing about 10-20% increases in
For Rankel, their homeowner’s insurance premium shot up by over $3,000
for the year to cost them a little over $9,000.
And Rebecca Hawronksy and her husband, living in Cooper City, got a
notice that their insurance would be going up by 40%.
According to state data, last year average annual premiums were over
$4,000 in five Florida counties, including Broward, Palm Beach,
Miami-Dade and Monroe. Many homeowners have seen their insurance
premiums double over the past five years to be about three times the
Another reason — though less likely since many homeowners have a
homestead exemption — could be an increase in property taxes. It’s more
likely to happen to a homeowner who purchased a home in the past year or
two, or for those who might have an investment property.
“Something our office sees often is that a homeowner’s first tax bill
may reflect the exemptions accrued by the previous homeowner. The second
property tax bill after the new resident has owned the property for a
full year would reflect the current owner’s exemptions, and often, those
savings may be lower than the previous owner’s,” noted the Palm Beach
County Property Appraiser’s office.
How can homeowners be prepared?
It’s hard to prepare for an increase in insurance premiums, since it’s
unknown how much they might increase each year. If it’s possible,
experts suggest having some reserves set aside to account for any
changes in the policy.
But for many homeowners, increased costs are causing them to have to cut
back where they can to make up the difference. Rankel is reworking his
monthly budget to cut back, including getting a less expensive phone
“We’re doing whatever we can to lessen the impact,” Rankel said.
For homebuyers in general, it’s important to remember that it’s likely
the taxes will change on a property they buy and to take that into
account when purchasing a home, said Patty DaSilva, broker with Green
Realty Properties in Cooper City.
The Broward County Property Appraiser’s office has a calculator on its
website to help homebuyers figure out how much their taxes will be on
the home they purchase, as does the Palm Beach County Property