Enter the total annual escrow amount required, the current amount in escrow, and the number of months remaining to determine the monthly escrow shortage (shortage per month).
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Monthly Escrow Shortage Formula
The following formula is used to calculate the monthly escrow shortage (the additional amount needed per month to make up the shortage over the remaining months).
ES = (TA - EA) / M
Variables:
- ES is the escrow shortage per month ($/month)
- TA is the total annual escrow amount required ($). (For this calculator, use the amount you still need to fund for the rest of the year.)
- EA is the existing amount in the escrow account ($)
- M is the number of months remaining in the year
- TA − EA is the total shortage (or surplus) in dollars ($)
To calculate the monthly escrow shortage, subtract the existing amount in the escrow account from the total annual escrow amount required. Then, divide the result by the number of months remaining in the year.
If EA > TA, then TA − EA is negative and the result indicates an escrow surplus (no shortage), not a shortage.
What is an Escrow Shortage?
An escrow shortage occurs when there are insufficient funds in your escrow account to cover the projected annual amount for your property taxes and/or insurance premiums. This can happen if the taxes or insurance premiums for the property increase unexpectedly throughout the year, causing the amount paid out by the escrow account to be more than what was initially estimated and collected by the lender.
How to Calculate Escrow Shortage?
The following steps outline how to calculate the monthly escrow shortage.
- First, determine the total annual escrow amount required (TA) ($) (use the amount you still need to fund for the remainder of the year).
- Next, determine the existing amount in the escrow account (EA) ($).
- Next, use the formula from above: ES = (TA – EA) / M.
- Finally, calculate ES (the escrow shortage per month).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
total annual escrow amount required (TA) ($) = 5000
existing amount in the escrow account (EA) ($) = 3000
number of months remaining in the year (M) = 6
Monthly escrow shortage (ES):
ES = (TA − EA) / M = (5000 − 3000) / 6 = 2000 / 6 = 333.33 ($/month)
