Your mortgage payment increased because your property taxes, homeowners insurance, or both went up
When your monthly payment jumps without warning, the culprit is almost always your escrow account — the part of your payment that covers property taxes and homeowners insurance. Your lender collects this money each month, holds it, and pays those bills on your behalf when they come due. If taxes or insurance rates rise, your lender recalculates what you need to pay each month to keep the account funded, and your payment goes up.
The increase is not optional. Property taxes and insurance are not part of your loan itself — they are obligations you owe to the county and your insurer. Your lender is legally required to make sure the escrow account has enough money to cover them. If it does not, the lender covers the shortfall and then raises your payment to recover that money.
You will receive a document called an escrow analysis or escrow statement before the increase takes effect. This statement shows exactly what changed, how much you owe for taxes and insurance over the next year, and what your new payment will be. Read it carefully — errors happen, and you have the right to dispute them.
Key Takeaways
- Payment increases come from rising property taxes or insurance premiums, not from changes to your loan balance or interest rate.
- Your lender sends an escrow analysis before the increase takes effect, showing the breakdown of what you will pay for taxes and insurance.
- You can request an escrow account review if you believe the calculation is wrong or if your taxes or insurance rates have dropped.
- Property tax increases are usually permanent, but insurance rate hikes can sometimes be reduced by shopping for a new policy or making home improvements.
How escrow accounts work and why they change
When you close on your mortgage, your lender sets up an escrow account and estimates how much you will owe in property taxes and homeowners insurance over the next year. That total is divided by 12, and that monthly amount is added to your mortgage payment. The money sits in the escrow account until the bills are due, then the lender pays them directly.
Every year, usually in late fall or early winter, your lender runs an escrow analysis. They look at what you actually paid for taxes and insurance in the past year, what the bills will be in the coming year, and whether the account has a surplus or shortage. If your county raised property taxes or your insurance company raised your premium, the analysis will show a higher annual cost. Your lender divides that new total by 12 and sets your new monthly payment.
If the escrow account has a surplus — meaning you overpaid — your lender may credit it toward your next payment, refund it to you, or apply it to the next year's bills. The rules vary by state and lender. If there is a shortage, your lender will ask you to pay it back, usually by raising your monthly payment or requesting a lump-sum payment.
Understanding your escrow analysis statement
The escrow analysis is a detailed breakdown of your account. It shows the opening balance, the amount you paid into escrow over the past year, what the lender paid out for taxes and insurance, and the closing balance. It then projects the coming year's taxes and insurance costs and calculates your new monthly payment.
Look for these key numbers: the annual property tax amount, the annual insurance premium, any shortage or surplus from the previous year, and the new monthly escrow payment. Compare the property tax figure to your most recent tax bill — if your county sent you a notice of assessment, that is the number to check against. For insurance, compare it to your current policy renewal notice.
If the numbers do not match what you know you owe, contact your lender immediately. Errors in the analysis are not common, but they do happen. Your lender may have used an outdated tax assessment, missed a discount on your insurance, or miscalculated the shortage. You have the right to request a correction.
Why property taxes increase and what you can do
Property tax increases come from your county or municipality, not from your lender. They happen for several reasons: the county reassessed your home's value, the local tax rate went up, or a bond or school funding measure passed. Some states reassess every year; others do it every few years. You will receive a notice from your assessor's office when this happens.
If you believe your home was assessed too high, you can file an appeal with your county assessor's office. The process and deadline vary by state, but you typically have 30 to 60 days from the assessment notice to challenge it. You will need to show that comparable homes in your area sold for less, or that your home has a defect that lowers its value. Many counties offer free or low-cost resources to help you prepare an appeal.
If your appeal is denied or you do not pursue one, the tax increase is permanent until the next reassessment. There is no way to avoid it through your lender or mortgage servicer.
How homeowners insurance premiums affect your payment
Insurance companies raise premiums for many reasons: your home is older and more expensive to repair, claims in your area have increased, your insurer is raising rates across the board, or your personal claims history changed. Unlike property taxes, insurance premiums are not set by the government — each company sets its own rates.
If your insurance premium jumped, contact your insurer and ask why. Sometimes the increase is automatic; sometimes it reflects a change in your coverage or a claim you filed. If the rate seems too high, get quotes from other insurers. Switching policies can lower your premium, and your new insurer will send the updated premium to your lender, which will recalculate your escrow payment.
You can also reduce your insurance cost by raising your deductible, bundling home and auto policies, installing security systems, or making home improvements that lower risk — like replacing an old roof or updating electrical systems. Ask your insurer which changes will lower your rate the most.
Requesting an escrow account review
If you think your escrow payment is too high, you can request a review. This is useful if your property taxes dropped due to a successful appeal, if you switched to a cheaper insurance policy, or if you believe the lender made an error in the analysis.
Contact your lender's escrow department and ask for a review. Provide documentation: a new property tax bill showing the lower amount, a new insurance policy with a lower premium, or evidence that the lender used outdated information. The lender will recalculate your escrow payment and may lower your monthly mortgage payment.
Some lenders allow you to request a review once per year; others allow it anytime. There is no cost to request a review, and you have nothing to lose by asking.
The difference between escrow increases and loan-related increases
A payment increase from escrow is different from an increase caused by your loan itself. If you have an adjustable-rate mortgage (ARM), your interest rate can go up after the fixed-rate period ends, which raises your payment. If you have a fixed-rate mortgage, your interest rate never changes, so the only reason your payment would increase is escrow.
If you are unsure whether your increase is from escrow or from your interest rate, check your loan documents or call your lender. Your promissory note will tell you whether your rate is fixed or adjustable. Your escrow analysis will show exactly how much of the increase is from taxes and insurance. If the increase is larger than the escrow analysis explains, ask your lender to clarify what caused the difference.
Frequently Asked Questions
Can I opt out of escrow and pay taxes and insurance myself?
Some lenders allow it, but most require escrow if you put down less than 20 percent. If you are allowed to opt out, you will save money on escrow fees, but you become responsible for paying property taxes and insurance on time. Missing either payment can result in a tax lien or a lapsed insurance policy, both of which damage your home and finances.
What happens if I disagree with the escrow analysis?
Request a written explanation from your lender showing how they calculated the new payment. If you still disagree, provide documentation of the correct tax or insurance amounts and ask for a correction. If the lender refuses, you can file a complaint with your state's banking regulator or the Consumer Financial Protection Bureau.
Will my payment go down if my property taxes decrease?
Yes. If your county lowers your assessment or you win a tax appeal, your lender will recalculate your escrow payment and lower your monthly payment. You may also receive a refund if the escrow account has a surplus after the taxes are paid.
How much can my payment increase in one year?
There is no legal cap on escrow increases. The increase depends entirely on how much your property taxes and insurance premiums rose. In areas with rapid tax growth or high insurance costs, increases of $100 to $300 per month are not unusual.
Is there a way to avoid escrow increases?
No. You cannot avoid property taxes or insurance requirements. You can lower your insurance premium by shopping for a better rate or raising your deductible, and you can appeal a property tax assessment if you believe it is wrong. But if taxes and insurance go up, your escrow payment will go up with them.