Why your payment is going up
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As many home buyers discover, getting a fixed-rate mortgage doesn’t necessarily mean your monthly payment will stay the same.
For many homeowners, in addition to paying principal and interest each month, mortgage payments also include amounts going into an escrow account. This account then pays homeowners’ insurance premiums and property taxes. mortgage insurance if the debtor is required to bear it.
This year, approximately 65% of escrow accounts are projected to remain open due to recent jumps in costs. According to Cotalitya real estate data and analytics company. The estimated average shortfall is $2,157.
While it’s not uncommon for escrow costs to adjust up or down each year, they’re up nearly 45% since 2019, according to Cotality. In some states, the rate is much higher: Homeowners in Florida and Colorado, for example, saw increases of 70% and 77%, respectively. cumulative Inflation from May 2019 to April 2025 According to the consumer price index, this rate was around 30%.
“Home buyers should expect these costs to increase,” said Selma Hepp, chief economist at Cotality. “But most of the time [consumers] “Think of a 30-year fixed-rate mortgage and think of it as locking in housing costs.”
Why might your payments increase?
Approximately 80% of mortgage borrowers have an escrow account. According to LeretaWhich provides property tax and flood data to mortgage servicers. Those who do not have an escrow account pay insurance and taxes directly.
When mortgage servicers make a transaction annual review of your escrow accountThey evaluate how much has been paid and predict how much will need to be paid next year. If there is a shortfall, lenders often increase your monthly payment by spreading the extra cost over 12 months. For example, an average deficit of $2,157 in 2026 means paying $179.75 more per month.
Experts say you may be given the option to pay for the shortage as a lump sum in advance.
“If you have enough in your emergency fund to cover the shortfall all at once, this will be the simplest way to put it behind you,” said certified financial planner Stephen Kates, a financial analyst at Bankrate.
“Paying over time can cause you to layer missing payments on top of ever-increasing monthly payments. [yearly] updated escrow calculation,” Kates said.
Home insurance costs increased
Amounts going into escrow are a growing share of homeowners’ payments, Hepp said.
“We have seen increases in insurance and property taxes over the last few years,” Hepp said.
The average annual cost of homeowners insurance is expected to reach $3,057 by the end of 2026, up 4% from $2,948 in 2025. accordingly insurance.comAn insurance comparison site. The average cost of homeowners insurance has increased 46% since 2021, driven by severe weather and natural disasters, the report shows.
To cover higher insurance premiums, you can shop for lower-cost coverage, compare deductibles or coverage limits and look for available discounts, Kates said.
Property taxes increased as well as home values
Although property taxes are generally a larger share of escrow amounts, “in some areas, insurance has grown much faster and is outpacing the total amount you need to put in escrow for property taxes,” Hepp said.
Kates said it may be possible to appeal a new property tax assessment, but you must have strong evidence that the value is too high. “Don’t object just because the bill seems expensive, and don’t automatically do that every evaluation cycle,” he said.
Additionally, you can check with your local government to see if exemptions or discounts are available for certain homeowners, such as people 65 and older.
