Key Takeaways:
- Escrow Confusion is Growing—Only 60% of respondents fully understand their escrow accounts, down from 80% last year.
- Rising Costs Surprise Mortgage Holders—68% saw higher mortgage payments due to increasing property taxes and insurance, and of those, 55% were surprised.
- Fixed-Rate Myth—45% wrongly believe a fixed-rate mortgage guarantees unchanged monthly mortgage payments.
- Lenders Communicating Well—81% believe their mortgage company provides necessary escrow information.
- Homeowners Concerned About Increases—44% said a 25% increase in their mortgage payment would cause financial hardship.
For many homeowners, the reality of rising property taxes and homeowners insurance premiums is hitting hard. LERETA recently released findings from its second annual Escrow Awareness Survey, shedding light on the growing financial burden facing homeowners and their understanding of mortgage escrow accounts. Escrow accounts play a crucial role in homeownership by ensuring property taxes and insurance premiums are paid on time. Nationally, the majority of mortgage holders (about 80%) have an escrow account.
According to the survey, which included homeowners who had purchased or refinanced their home within the last four years, only 60% of respondents with escrow accounts said they fully comprehend their function—a sharp drop from nearly 80% the previous year. Even among those who said they understood what an escrow account is, there were still misconceptions as to how these accounts actually operate and the impact to their monthly mortgage payment. The survey found that 45% incorrectly believed that having a fixed-rate mortgage means their monthly payments will never change, up from 36% in 2024.
This knowledge gap is concerning, especially as property taxes and homeowners insurance premiums continue to rise, leading to unexpected changes in monthly mortgage payments. More than two-thirds (68%) of respondents experienced an increase in their monthly mortgage payments over the past two years due to rising taxes and insurance costs, and of those, 55% were surprised, up two percentage points from the previous year. The survey found that:
- 80% said their property taxes have increased.
- 70% said their homeowners insurance increased
- 57% said their flood insurance premiums increased.
- 27% said they had been dropped by their homeowners insurance carrier and/or been alerted that their carrier is no longer servicing their area.
- 65% said it was “very” or “somewhat” difficult to find another insurance provider.
These rising costs are borne out by other data. According to ICE, nearly a third of the average single-family mortgage payment now consists of property taxes and insurance—the highest percentage since 2014. The financial burden of these rising costs is pushing some homeowners to reconsider their living situations, our survey found. Nearly half (49%) said they would consider selling their home and relocating if their property taxes rose significantly, while 27% would consider moving due to increased insurance costs. When asked if these rising costs would affect their ability to pay their mortgage, nearly half (44%) of respondents said a 25% increase in their mortgage payment would cause financial hardship, while 50% would struggle with just a 10% increase.
These statistics highlight the urgency of ensuring homeowners fully understand how escrow accounts work and how they impact monthly mortgage payments. While 81% of respondents reported their mortgage company provides necessary escrow information and 82% said they know how to access this information, 21% still felt they do not receive enough details about their escrow accounts. Most lenders offer escrow details through their websites, but borrowers may not always know where to look or what questions to ask. Of those who contacted their lender with escrow-related inquiries, 76% said they found the explanation helpful.
LERETA’s Annual Escrow Awareness Survey highlights a growing need for homeowners to better understand how their mortgage payments are structured. Homeowners who have an escrow account should:
- Review their escrow statement regularly – Lenders provide an annual escrow analysis that outlines projected and actual expenses.
- Understand that a fixed-rate mortgage doesn’t mean fixed payments – Property taxes and insurance premiums can change yearly, affecting monthly mortgage payments.
- Monitor property tax assessments – If a homeowner believes their property is overvalued in a property tax assessment, they could consider appealing.
- Shop around for homeowners insurance – With many insurers raising rates or pulling out of certain markets, comparing different policies can help secure better coverage at a competitive rate.
- Communicate with their mortgage servicer – If they have concerns about their escrow balance or upcoming payment changes, homeowners should reach out to their mortgage servicer for clarification.
With rising property taxes and insurance premiums showing no signs of slowing down, staying informed is key to avoiding unexpected financial strain. By taking a proactive approach to escrow education, homeowners can better prepare for the inevitable fluctuations in their monthly mortgage costs.
For more information, contact sales@LERETA.com.
