• 68% have seen their monthly mortgage payments increase over the past two years due to rising taxes and insurance premiums
  • More homeowners would not be able to make their monthly mortgage payment if the amount increased by 25%
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POMONA, Calif., January 21, 2025 —  LERETA, a leading national provider of real estate tax and flood services for mortgage servicers, has released the findings from its second annual Escrow Awareness Survey highlighting the significant gaps in homeowners’ understanding of mortgage escrow accounts and the impacts of rising property taxes and homeowners insurance premiums. The survey indicates that only 60% of homeowners with escrow accounts fully comprehend their function, and even among those there are still misconceptions as to how these accounts actually operate and the impact to their monthly mortgage payment.  

Nationally, approximately 80% of mortgage holders have an escrow account. Mortgage escrow accounts are used to pay homeowners’ property taxes and related insurance premiums (homeowners, flood and mortgage insurance.) Lenders require them for conventional mortgage borrowers who have 20% or less equity in their home. All borrowers with a federally backed FHA loan must have an escrow account for the life of the loan, no matter how much equity they have.

Key Findings:

  • Limited Understanding of Escrow Accounts: Only 60% of surveyed homeowners said they fully understand how an escrow account works, down from nearly 80% a year ago.
  • Unawareness of Payment Variability: When comparing survey results from this year to last, fewer homeowners understand the connection between monthly mortgage payments and potential escrow adjustments due to increases in taxes and/or insurance. The survey found that 45% of respondents mistakenly believe their monthly payments cannot change if they have a fixed-rate mortgage, an increase from 36% in 2024.
  • Increasing Cost of Homeownership: 68% of respondents have seen their monthly mortgage payment increase over the past two years, and of that percentage, 55% were surprised, up two percentage points from the previous year. Over the past two years, 80% of respondents’ property taxes have increased; 70% have had their homeowners’ insurance increase, and of respondents who have flood insurance, 57% have seen their premiums increase. Additionally, more than a quarter (27%) of respondents have been dropped by their homeowners insurance carrier and/or been alerted that their carrier is no longer servicing their area. Almost two-thirds (65%) of respondents said it was “very” or “somewhat” difficult to find another insurance policy.
  • Impact of Rising Taxes and Insurance: Almost half (49%) of respondents said they would consider selling their home and relocating if their property taxes increased significantly, and more than a quarter (27%) would consider moving if their insurance increased significantly.
  • Homeowners’ Hardship Concerns: There was an increase in the number of homeowners who are concerned about making their payment if their monthly pay amount increased: almost half (44%) said it would be a hardship if their mortgage payment went up by 25%, and 50% said it would be a hardship if their monthly payment increased by only 10%.
  • Borrower Access to Escrow Information: A clear majority of borrowers (81%) believe their mortgage company provides the escrow information they need via the lender’s website, and 82% said they know how to access it. Of those who had to contact their mortgage company with questions about a change in their escrow account, more than three-quarters (76%) said the lender was able to help them understand the reason for the change. However, 21% still said they would like more information specifically about their escrow account from their lender, suggesting that even though the information is available, some borrowers feel they may be missing something.

 

These findings and continued uncertainty about escrow accounts are particularly concerning given the ongoing increases in property taxes and insurance premiums nationwide. According to ICE, nearly a third of the average single-family mortgage payment was made up of property taxes and home insurance this year, the highest rate since 2014 (when the data started being collected.) Since 2020, average home prices have risen by more than 29%, resulting in many homeowners seeing double-digit tax increases. Additionally, homeowners’ insurance premiums have been steadily increasing nationwide—home insurance costs were up 23% year-over-year in 2024 , according to Quadrant Information Services.  

“The rising costs of homeownership, driven by escalating property taxes and insurance premiums, pose significant challenges for homeowners across the country,” said John Walsh, CEO, LERETA. “As these expenses account for an increasingly larger share of monthly mortgage payments, it’s more important than ever for homeowners to understand how escrow accounts work to avoid any confusion or financial stress. It’s clear from this survey that lenders are doing a good job of making escrow account information available to borrowers, but some homeowners still feel undereducated. At LERETA, we’re committed to providing lenders with timely and accurate escrow-related property data so they, in turn, can ensure borrowers understand any and all changes to their escrow accounts. We encourage borrowers to be diligent in understanding their unique escrow account details on an ongoing basis—and talk to their lenders if they have questions—since changes are inevitable,” said Walsh.