Homeownership

Why Your Mortgage Payment Can Change

Escrows, taxes, insurance, and what to watch for in your annual escrow review so changes in your payment feel expected—not like a surprise.

For homeowners After closing Escrow, taxes & insurance

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Coaching insight

Who this guide is for

This guide is for you if you already own a home (or are about to close) and want to understand why your payment may change over time.

It’s especially helpful if you:

Have a fixed-rate mortgage but noticed your monthly payment went up or down.
Receive an annual escrow analysis statement and aren’t sure how to read it.
Live in an area where property values and tax assessments move quickly.
Have changing insurance premiums, added coverage, or switched carriers.
Want to plan ahead so payment changes don’t wreck your monthly budget.

The goal is to help you see your mortgage payment the way a servicer does, so changes feel predictable and manageable, not random.

Foundations

Principal, interest, escrow & more—big picture

Two main pieces of most payments

Principal & interest (P&I): This is your actual loan payment. On a fixed-rate loan, the rate and schedule stay the same unless you refinance or recast.
Escrows: A monthly set-aside for property taxes, homeowners insurance, and sometimes mortgage insurance. These costs can—and do—change.

Other pieces that may be in or alongside your payment

Mortgage insurance (MI or PMI): Required on some loans until you reach a certain equity level. It can drop off or be removed over time.
HOA dues: Often paid separately to your association, but in some cases they’re collected with your payment.
Flood or specialty insurance: May be escrowed just like your primary homeowners policy.

The common thread: your rate may be locked in, but taxes and insurance are not. As those change, your escrow—and therefore your total payment—adjusts to keep your account in balance.

What really moves the needle

Top reasons your mortgage payment can change

Common reasons payments go up

An increase doesn’t always mean something is “wrong”—but it does mean something changed behind the scenes.

Property taxes increased after a reassessment or mill levy change.
Homeowners insurance premiums went up or coverage was adjusted.
Your previous escrow analysis showed a shortage, and the servicer is spreading that shortage over 12+ months.
You have an adjustable-rate mortgage (ARM) that reached a scheduled adjustment date.
You added new coverage (like flood insurance) that is now escrowed.

Seeing which line item changed is the key to understanding the new payment.

Reasons payments can go down or stay flat

Not all changes are bad news—some adjustments work in your favor.

Property taxes decreased or you appealed an assessment successfully.
You shopped insurance and found a more affordable policy.
Mortgage insurance was removed or automatically dropped once you reached the required equity.
You made a lump-sum escrow payment to cover a shortage instead of spreading it out.
You refinanced into a new loan with a different escrow setup.

Understanding these levers gives you options—not just a new payment to accept.

Bottom line: your payment is following the math. Once you know which piece moved, you can decide what to do next.

Numbers that matter

How your annual escrow review actually works

Once a year (sometimes more often), your loan servicer runs an escrow analysis to make sure enough is being collected to pay taxes and insurance.

They estimate the next 12 months of taxes and insurance based on the most recent bills they have.
They compare that to your current escrow balance and what you’re scheduled to pay in each month.
If there’s a projected shortage, they can usually spread it across 12+ months or give you the option to pay it in a lump sum.
If there’s a surplus above the allowed cushion, you may receive a refund check and a small payment decrease.

Your escrow statement should spell this out, but it’s completely fair to call and ask someone to walk through it line by line.

Real-world example

Same house, different tax bill

Example scenario (for education only)

Imagine you bought a home last year. The previous owner had a lower tax bill, and your first year of escrows was based on that amount:

Year 1: Your monthly payment feels comfortable. Taxes are based on the prior owner’s assessed value.
Year 2: The county reassesses the property at your new purchase price. Taxes jump, and your servicer pays a much higher bill than expected.
Escrow analysis: The servicer finds a shortage because they paid more out of escrow than they collected, and your new payment notice shows both a higher monthly escrow amount and a shortage spread over 12 months.

Nothing about your interest rate changed—but the tax line item did, and your payment followed. Understanding this shift helps you plan instead of panic.

Planning ahead

What to think through when your payment changes

A few simple questions can turn a confusing letter into a clear plan:

Which line item changed? Taxes, insurance, mortgage insurance, or an ARM adjustment?
Is there a shortage, surplus, or both? How is your servicer handling it?
Do you have the option to pay a portion of the shortage in a lump sum to keep the monthly increase smaller?
Is it time to shop insurance or ask questions about your tax assessment?
Does this change fit your budget? If not, is it worth exploring a refinance, recast, or other strategy?

The more clearly you understand each moving piece, the easier it is to protect your cash flow and long-term plan.

Smart questions

Questions to ask your loan servicer (and your advisor)

Use these prompts to open up a straightforward conversation about your new payment:

Can you show me exactly which part of my payment changed—and why?
How much of this is a one-time shortage vs. my new ongoing escrow amount?
Do I have options to handle the shortage differently?
When will you run my next escrow analysis? What would need to happen for my payment to adjust again?
If my goal is to lower my total monthly cost, what are my options? (insurance review, tax appeal, refinance, recast, etc.)
If I send you my escrow statement, can you help me translate it into plain English?

You don’t have to become an escrow expert—you just need to know which questions lead to clear answers and better decisions.

Want a second set of eyes on your payment or escrow?
We can walk through your statement, run the numbers with you, and explore whether a refinance, recast, or simple budget tweak makes the most sense for your situation.

Start your pre-approval → Ask your questions first