Taxes, Insurance Eat Up 21% of Mortgage Payments

Rising property taxes and insurance costs are surprising many homeowners and first-time buyers, sharply increasing monthly mortgage costs.

Published on Mar. 5, 2026

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A new analysis by Neighbors Bank found that property taxes and homeowners insurance costs now make up an average of 21% of monthly mortgage payments across the U.S. In some markets, these non-mortgage costs can consume over one-third of the monthly amount due, leaving less available to reduce principal and interest. While much of the housing affordability discussion focuses on home prices and interest rates, tax and insurance cannot be left out of the conversation with buyers, as these "hidden" costs can quietly add hundreds or even thousands of dollars to monthly housing costs.

Why it matters

As borrowers with loans backed by the Federal Housing Administration and other agencies are required to pay tax and insurance from servicing escrow accounts, they may not be fully aware of how these costs can change over time and impact their monthly payments. Many homeowners assume their payment will stay the same each year, but even if the mortgage rate doesn't change, taxes and insurance often do, surprising buyers and putting a strain on their budgets.

The details

The Neighbors Bank analysis examined nearly 450 metropolitan markets, calculating payment amounts based on a 6.59% fixed interest rate. It found that in markets where tax and insurance payments are the highest, their share can consume over one-third of the monthly amount due. U.S. homeowners saw average property tax bills increase by 4.1% and 2.7% in 2023 and 2024, respectively, with the mean assessment standing at $4,172 at the end of 2024. Surging property taxes are also fueling proposals from state lawmakers to ease some of those costs for residents.

  • In 2023, U.S. homeowners saw average property tax bills increase by 4.1%.
  • In 2024, U.S. homeowners saw average property tax bills increase by 2.7%.
  • At the end of 2024, the mean property tax assessment stood at $4,172.

The players

Neighbors Bank

A bank based in Columbia, Missouri that conducted the analysis on the impact of taxes and insurance on monthly mortgage payments.

Jake Vehige

The president of mortgage lending at Neighbors Bank.

Lereta

A property tax technology firm whose data was cited in the Neighbors Bank study.

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What they’re saying

“These nonmortgage costs can quietly add hundreds or even thousands of dollars to monthly housing costs. As a result, many borrowers only grasp their impact once the first few payments come due.”

— Jake Vehige, President of Mortgage Lending, Neighbors Bank

“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. They're recurring costs that need to be planned for from day one.”

— Jake Vehige, President of Mortgage Lending, Neighbors Bank

What’s next

Several state lawmakers have proposed measures to ease the burden of surging property taxes on residents, including in Florida where the governor has suggested abolishing property taxes altogether.

The takeaway

This analysis highlights the significant impact that taxes and insurance can have on monthly mortgage costs, beyond just home prices and interest rates. Homebuyers, especially first-time and low down payment buyers, need to be aware of these "hidden" costs and plan accordingly to avoid unpleasant surprises once they start making mortgage payments.