Escrow Accounts 101: Why Your Payment Changes After Closing (Florida 2026)

If you're buying in Miramar, Pembroke Pines, Hollywood, or Weston, understanding how escrow works before you close helps you budget correctly and avoid "payment shock" later.

What this means for Florida buyers:

If your insurance or taxes increase even after closing, your monthly payment can change. Planning escrow correctly upfront prevents surprises later.

1) What is an escrow account?

An escrow account (also called an "impound account") is a separate account your lender manages to collect and pay your property taxes and homeowners insurance on your behalf.

Here's how it works:

• Your monthly mortgage payment includes principal + interest + taxes + insurance (PITI).

• The taxes and insurance portions go into your escrow account.

• Your lender pays your tax bills and insurance premiums from that account when they're due.

Why lenders require escrow: It protects the lender's investment. If you don't pay taxes, the county can put a lien on the home. If you don't pay insurance and the home is damaged, the lender's collateral is at risk.

2) Why your payment changes (the 3 main reasons)

Reason #1: Property taxes increase

Most common for first-time buyers after purchase

In Florida, property taxes can reset when you buy because the county reassesses at your purchase price. If your initial escrow estimate was based on the seller's old tax bill, your payment will increase once your actual bill arrives.

Many first-time buyers budget using the seller's tax amount, only to face a payment jump later. This is why understanding how property taxes work in South Florida before closing is critical for accurate budgeting.

Prep tip: Always estimate taxes based on your purchase price, not the listing's tax history.

Reason #2: Homeowners insurance premiums change

Biggest wildcard in South Florida

Florida homeowners insurance is one of the most volatile line items in your payment. Premiums can increase at renewal due to:

• Market-wide rate increases

• Claims history (yours or statewide)

• Roof age or condition changes

• Carrier changes or non-renewals

If you want to understand why this happens and how to plan ahead, read why Florida home insurance is so high and how buyers can navigate it.

Important: If your insurance increases by $600/year, that's an extra $50/month added to your mortgage payment.

Reason #3: Your initial escrow estimate was low

Common in fast closings or late insurance quotes

When you close, your lender estimates what you'll need for taxes and insurance. If that estimate was conservative or incomplete, the escrow account will show a shortage at the first annual analysis, triggering a payment increase.

This is especially common when:

• Insurance wasn't finalized until late in the closing process

• Tax assessments weren't available yet

• HOA dues or special assessments weren't initially accounted for (though HOA dues typically aren't escrowed)

3) How the annual escrow analysis works

Once per year, your lender performs an escrow analysis to review:

• What was paid out (actual tax and insurance bills)

• What was collected (your monthly escrow contributions)

• Whether there's a surplus, shortage, or the account is balanced

If there's a shortage:

Your lender will:

• Spread the shortage over 12 months (increasing your payment)

• Or give you the option to pay the shortage as a lump sum

If there's a surplus:

Your lender may:

• Refund you the surplus (usually if it's over $50)

• Lower your monthly payment

• Apply it to the next year's escrow cushion

Escrow cushion:

Lenders are allowed to keep a cushion (usually 2 months of escrow expenses) to cover timing gaps between when bills are due and when you've saved enough. This cushion is factored into your payment.

4) Florida-specific escrow surprises (what to watch)

Insurance increases are the biggest wildcard

In Broward, Miami-Dade, and Palm Beach, insurance premiums can increase significantly year-over-year. Even if your taxes stay flat, a $1,200 insurance increase means your payment goes up by $100/month.

Many buyers are caught off guard because they budgeted based on the initial quote, not renewal reality. Understanding what Florida buyers should realistically budget for home insurance in 2026 helps avoid this shock.

We see these escrow adjustments most often in Broward, Miami-Dade, and Palm Beach purchases where insurance renewals or reassessed taxes arrive after the first year.

Property tax reassessment after purchase

Your first tax bill as the new owner will often be higher than the seller's bill because:

• The county reassesses at your purchase price

• The seller's Save Our Homes cap no longer applies to you

• You don't benefit from Homestead Exemption until the year after you file

Example:

• Seller's annual tax bill: $3,500

• Your purchase price triggers reassessment

• Your new annual bill: $5,200

• Monthly escrow increase: ~$140

Condo/HOA insurance overlaps

If you're buying a condo, the building's master insurance policy is separate from your own HO-6 policy. Both affect your total monthly cost, though typically only your HO-6 premium is escrowed. Make sure your lender captures the correct coverage amounts.

For context on total ownership costs beyond just your mortgage, review the true cost of owning a home in South Florida in 2026.

5) How to minimize escrow surprises

Before you buy:

• Get realistic insurance quotes early (not the day before closing)

• Budget taxes based on your purchase price, not the seller's bill

• Ask your lender for a detailed escrow breakdown on your Loan Estimate

• Understand when homestead exemption kicks in (usually the year after filing)

If you're trying to understand all your upfront and ongoing costs, our guide on how much cash Florida buyers really need in 2026 provides a complete cash-to-close breakdown.

After you close:

• Review your escrow analysis statement carefully when it arrives

• Shop for insurance at renewal (but notify your lender if you switch carriers)

• File for homestead exemption by March 1 to reduce future tax bills

• Keep a buffer in your budget for potential payment increases

6) Can you avoid escrow?

In some cases, buyers can waive escrow and pay taxes and insurance directly. However:

• Most lenders require escrow if you put down less than 20%

• Even when it's optional, escrow provides peace of mind and automatic payment

• You're responsible for making sure taxes and insurance are paid on time

Important: If you waive escrow and miss a tax payment, the lender can force-place insurance or pay your taxes and add the cost (plus fees) to your loan balance.

7) Common escrow questions (FAQ)

Why did my payment go up if I didn't change anything?

Your taxes or insurance likely increased. Check your annual escrow analysis statement for the breakdown.

Can I pay my escrow shortage as a lump sum?

Yes, most lenders allow you to pay the shortage upfront instead of spreading it over 12 months.

What if I overpaid into escrow?

If your surplus is over $50, your lender will typically refund it or apply it to next year's escrow balance.

Does my HOA fee go into escrow?

Usually no. HOA/condo fees are typically paid separately, though they still affect your total monthly housing cost.

Can escrow increases happen more than once?

Yes. If insurance or taxes continue to rise, escrow adjustments can happen annually. This is common in Florida's insurance market and why buyers should budget with a buffer.

Final takeaway

In 2026, escrow accounts are still the standard way Florida lenders protect their investment and help you stay current on taxes and insurance. But understanding how escrow adjustments work before you close prevents "why did my payment go up?" surprise calls a year later.

For buyers in Miramar, Pembroke Pines, Hollywood, Weston, and across Broward, Miami-Dade, and Palm Beach, the biggest escrow wildcards are insurance renewals and post-purchase tax reassessments. Budget for both before you write an offer.

Next steps

If you want a payment estimate that accounts for insurance volatility and post-purchase tax changes in not just today's numbers, we can run that before you write an offer:

• Get pre-approved in minutes: Start your application now

• Explore Florida homebuyer programs: Learn about low-down-payment and first-time buyer options

• Book a strategy call: Schedule a call to review your plan and avoid costly mistakes

EZ Funding Group, Inc. NMLS #349022 | Jaime Charouf NMLS #348964 | Equal Housing Lender