A new survey from LERETA, a national provider of real estate tax and flood services for mortgage servicers, reveals persistent gaps in mortgage borrowers’ understanding of escrow accounts — even as rising property taxes and insurance premiums exert upward pressure on monthly payments.
The findings, drawn from the company’s third annual Borrower Escrow Survey of 1,037 homeowners, show that while 61% of borrowers say they completely understand how a mortgage escrow account works, significant misconceptions remain about how escrow can affect total monthly mortgage payments.
Nearly four in 10 respondents (39%) mistakenly believe their mortgage payment cannot change if they have a fixed-rate loan with escrow, indicating a fundamental gap in awareness about how changes in taxes or insurance are reflected in monthly costs.
Escrow accounts — held by servicers to pay property taxes and insurance on behalf of borrowers — are a standard feature of most U.S. mortgages. However, the survey found that rising property taxes were cited by 62% of borrowers as the primary driver of increased monthly payments, followed by higher homeowners insurance (48%) and flood insurance (21%). About one-quarter also pointed to interest rate changes as a contributing factor.
“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,” said Katie Brewer, CEO of LERETA. “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.”
Despite these widespread impacts, the data suggest that many homeowners are still caught off guard by payment adjustments. Of those who experienced increases, 60% said the changes surprised them, compared with slightly more than half in the prior year’s survey.
Communication between servicers and borrowers appears to be improving: 70% of respondents say their mortgage company communicated how rising taxes or insurance could affect payments, up from 56% last year. Still, many borrowers want clearer, more accessible information. Nearly three-quarters said it would be helpful to view detailed property tax billing information through their lender’s online systems.
Affordability concerns are prominent, as 47% of those polled said a 10% monthly payment increase would be considered a hardship, and 15% stated they could not handle it.
LERETA’s survey underscores an ongoing need for borrower education about escrow mechanics and cost drivers — a need that financial services providers and servicers are positioned to help address more effectively.
