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Many homeowners assume that a fixed-rate mortgage means their monthly payment will never change. Unfortunately, that is not the case.

It’s true that your interest rate and principal are fixed, but your total monthly payment includes two additional components that can and do fluctuate: property taxes and homeowners insurance.

Here’s what you need to know and what you can do.

Your Mortgage Payment Isn’t Only Your Mortgage

Even with a fixed-rate loan, your monthly payment includes more than your mortgage itself. Most borrowers pay through an escrow account, which bundles three components into one payment:

• Principal and interest, which stay the same.
• Property taxes, which your local government updates each year.
• Homeowners insurance, which your insurer recalculates at renewal.

Your servicer collects these funds in escrow and uses the account to pay your tax and insurance bills when they come due. When either of those costs increases, your escrow contribution adjusts, and your total monthly payment changes along with it.

Escrow (Definition):
 An escrow account is a separate account managed by your servicer to collect and store the money needed to pay property taxes and insurance on your behalf. Because these costs change annually, escrow contributions are recalculated each year.

Why Property Taxes Increase

Local governments update taxes based on home valuations, tax rate changes, and funding needs for schools, safety services, and infrastructure. These adjustments are common and largely outside your control.

While you can appeal an assessment if you believe your property value was calculated inaccurately, the process can take time, and results are not guaranteed.

How Escrow Recalculations Lead to Payment Changes

Under federal servicing rules, servicers are required to analyze escrow accounts and provide an annual escrow statement. As part of that analysis, they project future tax and insurance costs and determine the monthly escrow amount needed for the coming year.

If your property taxes or insurance premiums increase, the servicer may find:

• a shortage, where the current escrow balance is lower than required, or
• a higher projected requirement for the next year.

When that happens, your monthly payment is adjusted to do two things at once:

1. Make up for any shortage from the prior year, and
2. Increase your ongoing escrow contribution so there will be enough money to cover the higher costs going forward.

Even modest changes in tax or insurance bills may produce a noticeable payment increase because you are often catching up for the past and funding higher future bills at the same time.

Why Homeowners Insurance Costs Are Rising

Across much of the United States, homeowners insurance premiums have been trending upward.

Several widely documented factors contribute to this, including higher construction and repair costs, more frequent and severe weather events linked to climate risk and changes in insurer appetite and availability in certain regions

What You Can and Cannot Control

Some parts of your payment are fixed or dictated by outside entities, while others are within your influence.

Because property taxes are set by government bodies and cannot be “shopped” the way insurance can, homeowners insurance can be one of the most practical levers available when trying to manage a rising mortgage payment.

How Shopping Your Insurance Can Help

When your mortgage payment rises due to escrow changes, reviewing your insurance is one of the most direct ways to respond. A lower premium reduces the amount your servicer must collect for insurance, which can offset some or all of a tax-related increase.

A simple process can help you understand what changed and what you can adjust:

• Review your escrow analysis to see whether the change came from higher taxes, higher insurance, or both. Escrow statements are required disclosures and must show projections and actual activity.
• Check your property tax assessment if the new valuation looks unusually high compared with recent sales or similar properties.
• Shop your homeowners insurance by comparing premiums, deductibles, and coverage across several carriers or via comparison tools.
• Send your new policy to your servicer so they can update the escrow calculation and adjust your payment going forward, as allowed under servicing rules.

For many homeowners, the savings from a lower insurance premium can be enough to meaningfully reduce a recent payment increase.

Bottom Line

Your interest rate is fixed, and your principal is fixed, but your total mortgage payment isn’t. It is directly influenced by property taxes and homeowners insurance, both of which can change from year to year.

While you cannot control tax assessments or broader insurance market trends, you can choose your insurance provider and coverage.

For many homeowners, reviewing and updating their insurance is one of the most practical ways to manage rising costs and bring their mortgage payment back toward a predictable level.