Enter the annual escrow amount, current escrow amount, and number of months into the calculator to determine the escrow shortage.
Escrow Shortage Formula
The following formula is used to calculate the escrow shortage.
ES = (TA - EA) / M
Variables:
- ES is the escrow shortage ($)
- TA is the total annual escrow amount required ($)
- EA is the existing amount in the escrow account ($)
- M is the number of months remaining in the year
To calculate the escrow shortage, subtract the existing amount in the escrow account from the total annual escrow amount required. Then, divide the result by the number of months remaining in the year.
What is a Escrow Shortage?
An escrow shortage occurs when there are insufficient funds in your escrow account to cover the projected annual amount for your property taxes and/or insurance premiums. This can happen if the taxes or insurance premiums for the property increase unexpectedly throughout the year, causing the amount paid out by the escrow account to be more than what was initially estimated and collected by the lender.
How to Calculate Escrow Shortage?
The following steps outline how to calculate the Escrow Shortage.
- First, determine the total annual escrow amount required (TA) ($).
- Next, determine the existing amount in the escrow account (EA) ($).
- Next, gather the formula from above = ES = (TA – EA) / M.
- Finally, calculate the Escrow Shortage.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
total annual escrow amount required (TA) ($) = 5000
existing amount in the escrow account (EA) ($) = 3000
number of months remaining in the year (M) = 6
