How to Calculate Aggregate Adjustments

By Motley Fool Staff – Updated Apr 30, 2025 at 3:16 PM

Key Points

Mortgage escrow accounts require a two-month expense cushion, impacting initial deposits.
The aggregate adjustment addresses mismatch between expenses and payment schedules.
A negative month-end escrow balance triggers a needed increase in up-front payment.

Mortgage borrowers often have to make payments into an escrow account to cover periodic expenses like property taxes and insurance. Lenders are allowed to incorporate a two-month cushion to cover expected expenses, and so an initial escrow deposit should always include at least two months' worth of those expenses. However, an aggregate adjustment is made when the timing of expenses doesn't match up with the monthly payments you make toward your mortgage. The aggregate adjustment can increase the amount you'll owe at mortgage closing.

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However, if any of the monthly ending balances are negative, then you'll need to add more money up front to avoid that negative balance. Take the number from the month with the largest negative balance, and turn it into a positive number. That will be the amount of the aggregate adjustment. You'll therefore pay into escrow two months' of expenses plus the aggregate adjustment amount.

The aggregate adjustment ensures that you always have money in escrow to pay anticipated bills. Otherwise, your lender could end up carrying a negative escrow balance on your behalf.

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