Question: My mortgage (with GMAC) has an escrow element tied to it. Every year, the amount collected exceeds the amount needed for the tax payment, but when the annual Escrow Analysis statement comes in, the mortgage company declares there is a shortage, and the amount of my mortgage payment will go up whether I pay the shortage or not.

First of all, what is up with that? If I paid in more, how is there a shortage?

And secondly, can I remove the escrow from this mortgage without refinancing? I know I can easily save for this tax payment throughout the year, and collect interest for myself. Thanks very much. Diane, Milwaukee WI

Answer: I wish you luck. The money that goes into an escrow account is used to pay for expenses such as real estate taxes, property taxes, and homeowners insurance. Lenders require an escrow account if you put less than 20% down. That’s a lot of people in the 2000s when a 20% down payment became the exception. The fluctuating payments could reflect a number of factors, ranging from higher bills to changes in the amount the lender requires as a cushion. Whatever the reason, some homeowners love escrow for its convenience and others can’t stand it.

Here’s the thing: If you have 20% or more equity in your home you can approach your lender. They may waive it for a fee. But lenders like escrow accounts so they aren’t eager to make the change. That’s why many homeowners with 20% or more in equity in their house end up refinancing to eliminate escrow (or perhaps more accurately, getting rid of escrow is an additional benefit to refinancing).