How Taxes and Insurance Can Affect Your Mortgage Payment

Knowledge Center

How Taxes and Insurance Can Affect Your Mortgage Payment

How Taxes and Insurance Affect Your Mortgage Payment

There are a few reasons why your monthly mortgage loan payment amount can change. If your mortgage payment has changed, it’s most likely been affected by a change in your property taxes or homeowners insurance. Let’s take a look at how these factors can influence your monthly mortgage payment.


What Your Mortgage Payment is Made of

First of all, let’s go over what all is included in your monthly mortgage payment. Your monthly payment includes your actual mortgage payment, which is comprised of principal and interest, along with property taxes as well as homeowners insurance. Collectively, these four components – Principal, Interest, Taxes, and Insurance, are referred to as PITI. Your principal and interest payments go toward repaying the mortgage loan, so these amounts are unlikely to change, however changes to taxes and insurance can cause your monthly payment to change over time. The property taxes and homeowners insurance portion of your payment are often held in an escrow account set up by your mortgage servicer so they can ensure those obligations are paid every year. It works by dividing your total taxes and insurance payment for the year by 12, so you pay 1/12 of your taxes and insurance bill in each monthly payment.


Property Taxes

Property taxes are the funds paid by property owners to their local and state governments to fund various services, including schools, infrastructure, and public services. Property taxes are calculated according to the assessed value of the home. The higher the assessed value of the property, the higher the taxes will be. So if the value of your home has appreciated over the year, you may see an increase in your tax bill, which will affect your monthly payment.

Several factors influence the value of a home, including the value of comparable properties in the area, the condition of the home, and the physical location of the home. Since property taxes are used to fund services in your community, your property taxes are partially based on how much revenue is required to pay for these services in your area. When cities and counties need additional funds for these services, your taxes may increase.

There are factors that can increase or decrease the value of the property, such as renovations to the home and even economic conditions, which will also increase or decrease the amount of property taxes due.


Homeowners Insurance

Most lenders require home buyers to purchase homeowners insurance, which provides financial protection for you and your home by covering damages to the property. Like property value, lenders also estimate the cost of homeowners insurance based on the property’s ZIP code and comparable homes in the area. Your exact insurance rate, however will primarily depend on the insurance provider and the policy you choose. You’ll decide how much coverage you want, the deductible you want to pay, and whether you want to combine or “bundle” your homeowners insurance with any other types of insurance, like car insurance. Since you have the freedom to shop around for different providers, policies, and bundles to best fit your needs, your exact payment may differ from what your lender originally estimated, but it will still give you a good general idea of what you can expect to pay. Even after you have closed on your mortgage loan, you may wish to regularly shop around to see if you can get a better policy or price. Or maybe you need to increase the amount of your coverage, or add a rider to protect high-value items. Any changes you make to your homeowners policy will in turn affect your monthly mortgage payment.

If you’re ready to apply for a mortgage loan, let our team help you get the loan you need. Visit our Mortgage Loan Center to learn more about the mortgage process, use our Home Buying Calculators to get a picture of what your home loan will look like, and check out our Buying a Home video series on YouTube for more information about home buying. Apply for a mortgage loan online or set up an appointment to speak with one of our Mortgage Loan Officers.



At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.


Learn More About Our Mortgage Loans