Property Taxes, Insurance Now Account For 21% Of Mortgage Payments

While home prices and mortgage rates often dominate affordability discussions, property taxes and homeowners insurance are taking up a growing share of monthly housing costs across the U.S., according to a report released Wednesday by Missouri-based Neighbors Bank.

The report, “The ‘Hidden’ Costs Causing Monthly Housing Payments To Rise,” found that taxes and insurance account for an average of 21% of monthly mortgage payments nationwide. This adds hundreds — and in some cases, thousands — of dollars to homeowners’ bills.

The study examined nearly 450 U.S. metropolitan areas, with researchers using recent home values, property tax data and homeowners insurance premiums to estimate the average monthly payment on a 30-year fixed-rate mortgage with a 6.59% rate.

“It’s important to look beyond the sticker price and understand how taxes and insurance will shape your monthly payment,” said Jake Vehige, president of mortgage lending at Neighbors Bank. “They’re recurring costs that need to be planned for from day one. Homebuyers who don’t account for them upfront can be caught off guard when their monthly payment is higher than expected or rises over time, and these costs can become burdensome for any homeowner as they increase.”

In some markets, taxes and insurance make up more than one-third of a typical monthly mortgage payment, leaving less of the borrower’s budget for principal and interest.

Metro-level breakdown

Illinois and Florida account for many of the highest-burden metro areas, but for different reasons.

In Illinois metros such as Decatur, Peoria and Rockford, relatively high property tax rates drive up monthly payments, even where home prices are moderate. In Florida markets like Pensacola and Miami-Fort Lauderdale-West Palm Beach, rising homeowners insurance premiums tied to hurricane and flood risk significantly increase costs.

Among the top 10 highest-burdened markets, Pensacola-Ferry Pass-Brent, Florida, ranked No. 1, with taxes and insurance accounting for 43.6% of the average monthly mortgage payment. The typical monthly principal and interest payment was $1,531, while taxes and insurance added $1,183, bringing the total to $2,714.

Other high-burdened markets included Decatur, Illinois, where taxes and insurance made up 37.4% of the average payment, and Massena-Ogdensburg, New York, at 36.5%.

The Miami metro area ranked seventh. In that region, the average monthly principal and interest payment was $2,383, with taxes and insurance adding $1,244 — about 34.3% of the total $3,627 payment.

By contrast, in some of the nation’s most expensive housing markets, taxes and insurance represent a relatively small share of monthly payments.

Urban Honolulu ranked lowest, with taxes and insurance accounting for just 9% of the average monthly payment. The typical principal and interest payment was $4,243, compared with $420 for taxes and insurance.

Hawaii’s low property tax rates and relatively stable homeowners insurance premiums contribute to the smaller share. Unlike many states, Hawaii relies more heavily on other revenue sources to fund schools and public services, helping keep property taxes low even as home values remain high.

Other metros with low non-mortgage costs included Morehead City, North Carolina; St. George, Utah; Heber, Utah; and Grand Junction, Colorado, where taxes and insurance generally accounted for about 9% to 10% of monthly payments.

The report also noted that rising tax and insurance costs can surprise homeowners over time — particularly if they’re a first-time buyer.

Many buyers use low down-payment loans backed by federal programs such as the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) or U.S. Department of Veterans Affairs (VA). These loans typically require escrow accounts that bundle property taxes and insurance into the monthly mortgage payment.

As a result, even borrowers with fixed-rate mortgages may see their monthly payments change.

“Many homeowners assume their payment will stay the same each year, but even if your mortgage rate doesn’t change, taxes and insurance often do,” Vehige said. “While you can’t control rising costs, reviewing your escrow statement for shortfalls, shopping for insurance annually and understanding how to appeal your property taxes can help prevent surprises and keep your budget on track.”