When you buy a home, your lender holds money in escrow to ensure that your property taxes and insurance premiums are paid in a timely manner. But things like inflation and severe weather events can impact your expected costs, requiring your bank or credit union to increase the amount held in escrow. In this article, we explain how Amplify calculates your escrow payments and why you may see changes to that number from year-to-year.

Key Takeaways

• An escrow account is a holding account for your property taxes and homeowner insurance premiums.
• Amplify conducts an escrow analysis every January to ensure your balances will match the amount owed in the coming year.
• Increases to escrow payments are often the result of increased property taxes or insurance premiums.
• Amplify holds the expenses but does not control these costs. Follow the steps outlined in this article to explore savings with your providers.

What is an escrow account?

An escrow account is a holding account that is created when you purchase a home. It is used to collect funds for property taxes and homeowner’s insurance throughout the year. The monthly amounts is calculated by taking the previous year’s expenses and dividing it by 12 to ensure the costs are spread evenly throughout the year.

What is an escrow analysis?

An escrow analysis forecasts your existing escrow payments against possible changes to your expenses. Every year, Amplify will compare your monthly escrow payments against the tax and insurance expenses of the previous year. Amplify will also set the property tax amount and use your homeowner insurance premiums to predict expenses.

This analysis will show how much needs to be paid towards the escrow account in the upcoming year. Because taxes and insurance can change at different points in the year, the estimate for your escrow payments may end up being higher or lower than was originally projected. This means you may have an escrow shortage, an escrow deficiency, or an escrow surplus by the end of the year.

• An escrow shortage means there isn’t enough balance to meet the required cushion for the next escrow cycle.
• An escrow deficiency means that your account has gone negative.
• An escrow surplus means that you have contributed more to your escrow account than needed. 

If you experience an escrow shortage or escrow deficiency, don’t worry: Amplify will still make the payments on your behalf. You will just be required to repay the balance owed to keep your account current. If you have overpaid on your escrow account, Amplify will refund the excess funds via check or direct deposit to your savings account.

When do escrow analyses occur?

Amplify performs escrow analyses for its members in January of each year.

When are my taxes and insurance paid?

Property taxes are paid once a year and will be paid in full prior to December 31 of the calendar year. Homeowner’s insurance is paid at least 30 days prior to the expiration date of the insurance policy.

Why did my insurance premiums go up?

While we recommend speaking with your insurance representative directly to discuss rising costs, it is not uncommon to see premium costs go up year-over-year, even without any claims. The impact of inflation – such as labor and materials for home repairs – and severe weather events can cause insurance companies to increase premiums in some markets.

That said, it is important to note that Amplify does not control the costs of insurance premiums or property taxes. Amplify’s role is simply to collect and hold these funds in your escrow account to ensure that your bills are paid in full and on time.

How can I lower escrow expenses in the future?

While you cannot change the money owed as part of an existing escrow shortage or escrow deficiency, there are steps you can take to help lower the cost of your payments for the upcoming year.

• Rate shop for insurance. If your insurance premium has increased, you may be able to find a cheaper quote on the same coverage with another provider. Get quotes from several different companies to compare costs and policies.
• Ask about insurance discounts. In some cases, it is possible to lower your premiums by bundling different services under a single provider. There may also be inexpensive add-ons to your property that will lower the insurance costs, such as a security system.
• Appeal your property taxes. If you believe your local appraisal review board has overstated the value of your home, you have the option to protest their decision. Your annual Notice of Appraised Value will include protest instructions.

Note: Amplify has partnered with Ownwell, a third-party service provider that automates property tax appeals for our borrowers (often with no upfront cost). Visit our help center article to learn more about their services.

• Explore tax exemptions. In Texas, there are several ways to lower the taxable value of your home through exemptions. You may qualify for:
  • Residence homestead exemption.
  • Inherited residence exemption.
  • Age 65 or older or disabled persons exemption.
  • Disabled veterans and surviving spouses of disabled veterans.
  • Surviving spouse of first responders killed in the line of duty.

Exemptions are not automatically granted to taxpayers, which means you will need to apply and be approved by your local appraisal district. If you work with a tax professional, make sure you take time to discuss tax emptions with them before the next filing period.

Who do I contact with questions?

If you would like to discuss your escrow analysis with a loan servicing agent at Amplify, email our team at loanservicing@goamplify.com or contact us by phone at (512) 836-5901.