“Rising property taxes and insurance premiums continue to change homeowners’ experiences month to month, and escrow is often where that impact is first seen,” said Katie Brewer, CEO of LERETA. “This year’s survey confirms that many borrowers are confident in their understanding of escrow, but misconceptions still exist and this gap can lead to real frustration as payments change.
“LERETA is working with service providers to bring timely, accurate tax and flood data into their processes so they can communicate changes earlier, explain them more clearly and ensure borrowers feel prepared rather than surprised.”
The survey also found that 61% of borrowers said they fully understand how escrow accounts work, up slightly from 60% last year. Escrow accounts are used by mortgage servicers to collect money for property taxes and insurance, which are then paid on behalf of the borrower.
But despite this perceived understanding, confusion remains widespread. The survey shows that 39% of borrowers incorrectly believe that their total monthly mortgage payments cannot change if they have a fixed-rate mortgage and an escrow account, compared to 36% a year earlier.
Of borrowers who experienced a payment increase, 62% said higher property taxes contributed to the change, compared to 57% last year. Nearly half (48%) cited higher insurance premiums for homeowners, while 21% pointed to rising flood insurance costs. More than a quarter (26%) also mentioned interest rate changes.
Payment increases continue to catch many borrowers off guard. Of those who saw their monthly payments increase, 60% said they were surprised by the change, up from just over half last year.
Borrowers generally recognize the key components of escrow accounts. The survey found that 93% believe escrow includes money to pay property taxes, up from 91% last year. But awareness of insurance coverage on escrow accounts was slightly lower, with 85% saying escrow includes money to pay homeowners or flood insurance.
The research shows that mortgage servicers have improved communication with borrowers. About 70% of borrowers said their mortgage company had communicated how rising taxes or insurance could affect their monthly payments, up from 56% last year. Additionally, 78% said their servicer communicates clearly about escrow, including about 30% who said they strongly agree.
Affordability concerns remain high, with nearly half of borrowers (47%) saying a 10% increase in monthly payments would be a problem, while 15% say they cannot handle such an increase. With a 25% cost increase, 40% of respondents said they would not be able to manage their payment.
Borrowers also expressed a desire for more transparency; 72% indicated that it would be very helpful to access property tax assessment information (including amounts and payment status) through their mortgage company’s website or mobile app.
#Misconceptions #mortgages #persist #payment #amounts #increase