Avoiding annual Escrow Shortages

Hello! My primary residence and my rental property are both through the same lender and every year the lender sends me a letter stating that I am a couple hundred bucks short in my escrow account. They give me the option of increasing the monthly payments over 12 months or pay outright to make up for the shortage. My mortgage payments also tend to increase every year.

My question is how can my mortgage payments increase and my escrow account keeps coming up short? What’s the reason behind the increases, if not for taxes? Which I believe the escrow account is suppose to be for.

Three things can affect the mortgage amount:

Principal and Interest, if it is an ARM


Thanks for the quick response Keith. They are 30 year fixed rates. But I didn’t factor in insurance premiums increasing.