How to Fix a Negative Escrow Account

by Cynthia Measom, studioD

Even though an escrow account's design forces you to contribute funds to cover your annual property tax bill, it can fall short. When city or county taxes rise, the amount you have dutifully contributed to the escrow account may not be enough to cover the increase and leaves your escrow account lacking. In some cases, the shortfall may prove significant. Take advantage of options that allow you to fix a negative escrow account in a way that works best for your budget.

Find out the amount you need to pay to fix the negative escrow account. Lenders often send borrowers a letter detailing the shortage amount and options. Options include paying the escrow shortage amount as a one-time payment or allowing the lender to add the escrow shortage to your upcoming monthly payments.

Pay the shortage amount in full to the lender. Make the payment directly to the escrow account, not toward your mortgage balance. Make your mortgage payment separately.

Continue making payments toward your mortgage and wait for the lender to add the negative escrow balance to your payments if you do not want to pay the balance in full.


  • When refinancing a mortgage, ask the lender about rolling the negative escrow balance into your new loan. If you have enough equity in your home at the time of the refinance, you can use it to fix the negative escrow account.


  • If you do not elect to pay the negative escrow balance in full, the lender can divide the amount due and add it to your monthly payments. This will increase your monthly house payment.

About the Author

Based in Texas, Cynthia Measom has been writing various parenting, business and finance and education articles since 2011. Her articles have appeared on websites such as The Bump and Motley Fool. Measom received a Bachelor of Arts in English from the University of Texas at Austin.

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