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How Property Taxes Impact Your Mortgage Payment

June 6, 2025 by Kay Monigold

When buying a home, most people focus on the home price, interest rate, and monthly payment. But there’s another major factor that can significantly affect your mortgage: property taxes. These taxes can make your mortgage payment higher than expected and understanding how they work is key to managing your budget effectively.

Below, I will break down how property taxes influence your mortgage and what you can do to plan ahead.

What Are Property Taxes?
Property taxes are local taxes assessed on real estate by your city or county government. These funds help pay for public services like schools, police and fire departments, roads, and parks. The amount you owe each year is based on the assessed value of your home and the tax rate in your area.

For example, if your home is valued at $300,000 and your local property tax rate is 1.2%, you will owe $3,600 in property taxes annually.

How Property Taxes Affect Your Mortgage Payment
Most homeowners pay their property taxes through an escrow account set up by their mortgage lender. Here is how it works:

Your lender estimates your annual property tax bill, divides it by 12, and adds that amount to your monthly mortgage payment. The lender collects this money each month and pays the tax bill on your behalf when it comes due.

So, if your base mortgage payment (principal + interest) is $1,500 and your estimated monthly property tax is $300, your total mortgage payment becomes $1,800.

This means your monthly payment can fluctuate, even if your loan amount and interest rate stay the same.

When Property Taxes Go Up
Your local government reassesses property values regularly. If your home’s value increases or the tax rate changes, your property taxes—and your mortgage payment—can go up, too.

Each year, your lender performs an escrow analysis to check if you’ve paid enough to cover your tax and insurance bills. If taxes have increased, you may receive a notice of escrow shortage and a higher monthly payment to make up the difference.

This surprise can catch homeowners off guard, especially if the increase is significant.

Tips to Stay Ahead

  1. Know Your Local Rates:
    Before buying a home, research the area’s property tax rate. A slightly more expensive home in a lower-tax area may have a lower monthly cost than a cheaper home with high taxes.
  2. Watch for Reassessments:
    Stay informed about property assessments in your area. If you think your home’s assessed value is too high, you may be able to appeal the assessment.
  3. Plan for Increases:
    Property values often rise, especially in desirable neighborhoods. Build some cushion into your budget for potential increases in taxes.
  4. Review Your Escrow Statement:
    Lenders send escrow statements each year. Review them carefully and ask your lender if anything looks off.

Understanding how property taxes affect your mortgage helps you plan smarter, avoid surprises, and stay in control of your housing costs. It’s not just about what you borrow, it’s also about what your community collects.

Filed Under: Mortgage Tagged With: Escrow Account, Mortgage Tips, Property Taxes

The Impact of Inflation on Mortgage Rates and Home Affordability

June 5, 2025 by Kay Monigold

Inflation has made a loud and lasting entrance into our daily lives. From groceries to gas prices, everything seems more expensive. One of the most significant areas where inflation leaves its mark is in the housing market, particularly mortgage rates and home affordability. As inflation continues to fluctuate, many potential homebuyers are left wondering how it all connects, and what it means for their financial future.

How Inflation Drives Mortgage Rates
Inflation refers to the rise in the cost of goods and services over time. When inflation is high, the Federal Reserve typically responds by raising the federal funds rate in an effort to slow down spending and stabilize the economy. While the Fed does not directly set mortgage rates, its policies heavily influence them. As borrowing becomes more expensive for banks, those costs are passed down to consumers in the form of higher interest rates, including mortgage rates.

As of today, inflation remains a persistent concern, with housing costs playing a central role in many households’ budgets. Mortgage rates, which hovered near historic lows during the early pandemic years, have risen significantly. For a homebuyer, this shift can mean hundreds, or even thousands, more in monthly payments compared to just a few years ago.

Why Home Affordability Has Taken a Hit
Home affordability is a measure of how easily a typical family can afford to buy a median-priced home. With home prices still elevated and mortgage rates rising, affordability is at its lowest point in decades for many regions. Even if home prices stabilize or slightly decline, the effect of higher interest rates keeps monthly payments high, putting homeownership out of reach for many middle-income buyers.

For example, a $400,000 mortgage at 3% interest has a monthly payment of about $1,686 (excluding taxes and insurance). At 7%, that same loan would jump to roughly $2,661, a staggering difference for most households. That shift alone can drastically reduce buying power and force many would-be buyers to delay their home purchase or consider less expensive areas.

What Can Buyers Do?
Despite these challenges, buying a home is still possible with the right strategy. Improving your credit score, reducing debt, and saving for a larger down payment can all help secure a better mortgage rate. Some buyers are exploring adjustable-rate mortgages (ARMs) or buying discount points to lower their rates upfront. Others are considering smaller homes or moving to more affordable locations to stay within budget.

For those unable to buy right now, staying financially prepared is key. Continue building your credit, track market trends, and speak with a mortgage professional about your options. Inflation may not disappear overnight but understanding how it affects your homebuying journey is the first step.

Filed Under: Mortgage Tagged With: Home Affordability, Inflation Impact, Mortgage Tips

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Our Team

Kay MonigoldKay Monigold
Owner/Mortgage Broker/Residential Mortgage Loan Originator
NMLS#1086176

Ron MartinRon Martin
Residential Mortgage Loan Originator

NMLS#316821

Steven LoweSteven P Lowe, Sr
Residential Mortgage Loan Originator
NMLS #1085638

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