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As many home buyers are finding out, getting a fixed rate loan doesn’t mean your monthly payment will stay the same.
For many homeowners, in addition to principal and interest payments each month, their mortgage payment also includes amounts that go into an escrow account. That account then pays for homeowner’s insurance premiums and property taxes, as well as mortgage insurance if the borrower is required to carry it.
This year, about 65% of escrow accounts are expected to be short because of the recent jump in those costs, according to Cotality, a real estate data and analytics company. The total estimated deficit is $2,157.
While it’s common for escrow fees to adjust up or down each year, they have increased nearly 45% since 2019, according to Cotality. In some states, it was even higher: For example, homeowners in Florida and Colorado saw jumps of 70% and 77%, respectively. Cumulative inflation from May 2019 to April 2025 was about 30%, based on the consumer price index.
Home buyers “should expect those costs to go up,” said Selma Hepp, Cotality’s chief economist. “But usually [consumers] think of a 30-year fixed-rate loan and think of it as a fixed-rate mortgage. “
Why your payments may go up
About 80% of mortgage borrowers have an escrow account, according to Lereta, which provides real estate tax and flood data to real estate agents. Those without an escrow account pay insurance and taxes directly.
When mortgage servicers do an annual review of your escrow account, they check what has been paid and plan what will be needed next year. If there is a shortfall, lenders typically spread the additional cost over 12 months, increasing your monthly payment. For example, a 2026 median shortfall of $2,157 would mean paying $179.75 more each month.
You may be offered the option of paying the shortfall up front as a lump sum, experts say.
“If you have enough in your emergency fund to cover the deficit all at once, that’s going to be an easy way to put it behind you,” says certified financial planner Stephen Kates, a Bankrate financial analyst.
“Paying later can leave you placing shortfall payments on top of ongoing monthly payments created by [yearly] updated escrow calculations,” Kates said.
Homeowners insurance costs have increased
The amounts that go into escrow are a growing share of homeowner payments, Hepp said.
“Over the last few years, we’ve seen increases in insurance taxes and property taxes,” 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, according to Insurify.com, an insurance comparison site. Driven by severe weather and natural disasters, the average cost of homeowners insurance is up 46% from 2021, the report shows.
To deal with high insurance premiums, you can shop around for low-cost coverage, compare deductibles or coverage limits and look for available discounts, Kates said.
Property taxes have risen in line with home values
Property taxes have also increased as home values have increased. The average annual U.S. mortgage paid by homeowners was $3,018 in 2024, up 27.4% from 2019, according to Cotality. During that time, home prices jumped 51.6 percent, Cotality data shows.
While property taxes are usually a large portion of escrow prices, “in some areas the insurance has grown so quickly that it exceeds the total amount you have to put into paying property taxes,” Hepp said.
It may be possible to appeal the new property tax assessment, Kates said, although you must have strong evidence that the value is too high. “Don’t be attracted because the bill sounds expensive, and don’t automate every test cycle,” he said.
Additionally, you can check with your local government to see if there are any exemptions or reductions available to certain homeowners, such as those 65 or older.
