An escrow shortage happens when there's not enough funds to pay the property taxes and insurance. This usually happens when the cost of these items increase.

If a shortage is found, the amount is evenly divided and added to the next 12 mortgage payments. This starts on the effective date of the escrow analysis statement.

You have the option to pay the full shortage amount to avoid it being added to your mortgage payments.

• Before the effective date of the escrow analysis: If paid in full before this date, the shortage amount is not added to the following 12 payments.
• On or after the effective date of the escrow analysis: If paid in full on or after this date, the shortage amount is removed from future monthly payments.

See also: How do I pay my escrow shortage?

More information

Please be aware, a shortage only addresses an existing deficiency within the escrow account. It does not account for the increased amounts required to pay future taxes and insurance. As a result, your mortgage payment may still increase.

Check out our page, "What is an escrow account?" for more information.

Visit our Here’s what you need to know about making mortgage payments page to learn more.