A fixed-rate mortgage is not the same as a fixed monthly payment. And yet, a persistent and large share of borrowers struggle to grasp the difference as the ancillary costs of homeownership continue to rise.
When a homeowner with a mortgage makes their monthly mortgage payment, a portion of their payment funnels into an escrow account managed by their mortgage servicer, earmarked for payment of property taxes, homeowners insurance and mortgage insurance, if required.
Based on the findings of a recent survey by Lereta, a contractor of real estate tax and flood services for mortgage servicers, as many as 6 in 10 borrowers say they “completely understand” how that process works, roughly the same as last year’s survey results showed.
But 39% mistakenly believe their total monthly payment cannot change if they have a fixed mortgage interest rate and an escrow account — up from 36% last year — underscoring persistent misconceptions that Lereta says can lead to financial shocks for homeowners.
“This year’s survey reinforces that many borrowers feel confident in their understanding of escrow, yet misconceptions still persist and that gap can lead to real frustration when payments change,” noted Katie Brewer, CEO of Lereta, in a press release announcing the findings last week.
Unsurprisingly, Lereta says that borrower satisfaction with their servicer was 67 points lower among the 57% of homeowners who experienced an escrow-related payment increase than the remainder who saw no change last year.
Servicers conduct escrow analyses to assess whether the amount collected from a borrower each month was sufficient to cover their tax and insurance bill. If the escrow account was insufficiently funded, servicers will issue an escrow adjustment, raising the borrower’s total monthly mortgage payment by the appropriate amount.
Escrow shocks have hit homeowners across the U.S. in recent years as property taxes and homeowners insurance costs have spiked. Escrow accounts are mandated for many first-time homebuyers and low- and moderate-income borrowers who cannot make a 20% downpayment.
Real estate market analytics firm Cotality has called rising escrow payments “one of the biggest risks” for the housing market in 2026, as the share of monthly mortgage payments funneled into escrow accounts continues to rise, fueled by surging property tax and homeowners insurance costs.
Nationwide, escrow-related costs rose 30% on average in 2025 — up about 45% from five years ago — to account for 30% or more of a typical monthly mortgage payment in 35 states. Escrow costs constituted 40% or more of a typical monthly mortgage payment in nine states, maxing out at 45% in Nebraska, according to Cotality, which says there is “little sign that this growth will slow down.”
Lereta’s survey findings suggest, however, that escrow account misconceptions persist despite borrowers reporting improved communication about escrows from mortgage companies, with 70% of respondents affirming that their mortgage company communicated how rising taxes or insurance costs could change their monthly payment, compared to 56% last year.
Among those who saw their monthly payment increase due to an escrow adjustment last year, 60% said they were surprised, up from 53% last year.
“Property taxes remain the most frequently cited driver of payment increases, rising from 57% last year to nearly two thirds (62%) this year. Insurance related impacts also increased, with nearly half (48%) citing higher homeowners insurance premiums,” the report read. About 1 in 5 cited higher flood insurance premiums.
This year’s survey saw 47% of respondents indicate that a 10% monthly payment increase would be a hardship, while 15% said they could not afford it outright. At a 25% increase, 4 in 10 borrowers said they would not be able to handle the change.
“Rising property taxes and insurance premiums continue to reshape what homeowners experience month to month, and escrow is often where that impact shows up first,” added Brewer.
