How to read your escrow analysis (and what it means for your mortgage payment) 

In this article: 

• What is an escrow analysis? 
• Why your escrow payment changes every year 
• How to use your escrow analysis to plan ahead 
• How to read the escrow analysis statement 
• Why escrow shortages are common 

Your escrow analysis is one of the most important documents you receive as a homeowner, yet it can also be one of the most confusing. Because your mortgage payment often changes based on your escrow activity, understanding your analysis can help you anticipate adjustments, avoid surprises and stay in control of your housing costs. 

This guide explains how to read your escrow analysis step-by-step, what the numbers mean and how the results affect your monthly mortgage payment as a Desert Financial member. 

What Is an escrow analysis? 

An escrow analysis is a yearly review of your escrow account. Desert Financial performs this review to determine whether the amount collected each month is enough to cover your upcoming property tax and homeowners insurance bills. The analysis calculates: 

• Whether you have a shortage (not enough funds)
• Whether you have a surplus (extra funds)
• Whether your monthly mortgage payment needs to be adjusted
• Whether tax or insurance amounts changed
• Whether any deficiency occurred during the year

The goal is to ensure that your escrow account stays accurate and has the funds needed to pay your bills on time. 

Why your escrow payment changes every year 

Your escrow payment changes because your property taxes and homeowners insurance costs change. These bills are rarely the same from year to year. Common reasons for changes include: 

• Increased insurance premiums
• Higher property tax assessments
• Adjusted tax rates in your local districts
• Home improvements that affect taxes
• Changes in insurance coverage or replacement costs
• Switching insurance providers
• Refunds that weren’t deposited into escrow 

Even small changes in these bills can affect your escrow account and your mortgage payment. 

How to read the escrow analysis statement 

Most escrow analysis statements include several key sections. Here’s what each one means. 

Projected Payments for the Coming Year: This section shows what Desert Financial expects your homeowners insurance and property taxes will cost for the upcoming year. It includes: 

• Estimated tax payments
• Estimated insurance premiums
• The total amount your escrow must collect

Actual Escrow Activity From the Previous Year: This section shows what actually happened in your escrow account over the prior year, including: 

• Monthly escrow deposits
• Insurance payments made
• Tax payments made
• Any adjustments or advances

Escrow Shortage or Surplus: Your statement will show one of the following: 

Escrow shortage: Your escrow account did not have enough funds to cover last year’s bills. This is extremely common. 

Escrow surplus: More money was collected than needed. Refunds of $50 or more are issued. 

Escrow deficiency: Your escrow account went negative at some point, and Desert Financial advanced funds to pay a bill. 

New Monthly Mortgage Payment: This section shows how your payment will change due to updated escrow projections. If your taxes or insurance increased, your monthly payment will likely increase. If they decreased, your payment may go down. Your total mortgage payment includes: 

• Principal
• Interest
• Escrow (taxes and insurance)

Options for Repaying a Shortage: If you have an escrow shortage, you typically have two options: 

Pay the shortage in full or spread it over 12 months. Paying the shortage in full lowers the increase to your monthly payment. If you spread it over 12 months, your payment increases slightly to repay the shortage over time. Your statement will show the difference between these options. 

Why escrow shortages are common 

Many homeowners are surprised by shortages, but they are very common and often unavoidable. Shortages do not mean something is wrong — they simply reflect real-world changes in your bills. 

Reasons include: 

• Insurance premiums increased
• Tax assessments went up
• Refund checks were not deposited into escrow
• Billing changes from counties or insurers
• Mid-year insurance changes
• Overlapping tax or insurance payments

Why your payment can increase even if you have a surplus 

A surplus reflects last year’s activity. Your payment for the upcoming year is based on future projected costs. This means you can have a surplus but still see your payment increase if: 

• Your taxes are projected to rise.
• Your insurance premium increased.
• Your escrow projections for next year are higher.

How to use your escrow analysis to plan ahead 

Review your analysis carefully and consider the following: 

• Did my taxes increase? If so, is the increase in line with county assessments? 
• Did my insurance premium increase? If yes, compare your renewal to last year’s policy. 
• Did I switch insurance providers? Did I deposit the refund into escrow? 
• Did I have any large shortages or deficiencies? If so, consider whether insurance or taxes changed unexpectedly. 
• Will my new payment fit easily into my budget? If not, you may want to explore payment options. 

Understanding these factors helps you make informed financial decisions for the year ahead. 

What you can do to manage escrow changes 

If your escrow analysis shows a significant increase in your payment, consider the following options: 

• Pay your shortage in full: This helps keep your monthly payment as low as possible. 
• Review your insurance policy: Ask your agent whether adjustments, discounts or deductible changes could reduce your premium. 
• Ensure insurance refunds are deposited into escrow: This helps prevent shortages next year. 
• Track property tax changes: Review your county’s tax notices to understand future increases. 
• Contact Desert Financial: We can walk you through your options. 

When your escrow analysis may need review 

We’re always here to support you with clear answers and member-first service. Contact Mortgage Servicing at (602) 433-7000 or firstmortgageservicing@desertfinancial.com if: 

• Your analysis seems incorrect.
• Your insurance renewal does not match our records.
• You recently switched insurance providers. 
• You changed your tax district or exemption status.
• You are unsure why your payment changed.
• You want to discuss payment options for a shortage.

Our team can help review the details and make corrections if needed.