“It’s important to look beyond the sticker price and understand how taxes and insurance will change your monthly payment,” says Jake Vehige, president of mortgage lending at Neighbors Bank. “It’s a recurring expense that needs to be planned for from day one. Homebuyers who don’t respond early can be caught off guard when their monthly payment is higher than expected or increases over time, and these costs can become a burden for any homeowner as they grow.”
In some markets, taxes and insurance make up more than one-third of a typical monthly mortgage payment, leaving the borrower with little budget for principal and interest.
Metro level classification
Illinois and Florida make up the most heavily burdened metro areas, but for different reasons.
In large Illinois cities such as Decatur, Peoria and Rockford, high property tax rates drive up monthly payments, even when housing prices are moderate. In Florida markets such as Pensacola and Miami-Fort Lauderdale-West Palm Beach, rising homeowners insurance premiums tied to hurricane and flood risks are driving up costs significantly.
Among the top 10 most burdensome markets, Pensacola-Ferry Pass-Brent, Florida, ranked No. 1, with taxes and insurance accounting for 43.6% of the average monthly mortgage payment. The average monthly payment and interest payment was $1,531, while taxes and insurance added $1,183, bringing the total to $2,714.
Other high-burden markets include Decatur, Illinois, where taxes and insurance make up 37.4% of the bill, and Massena-Ogdensburg, New York, at 36.5%.
The Miami metro area ranked seventh. In that county, the average monthly payment for principal and interest was $2,383, with taxes and insurance adding up to $1,244 — about 34.3% of the total payment of $3,627.
In contrast, in some of the country’s most expensive housing markets, taxes and insurance represent a small portion of monthly payments.
Urban Honolulu ranks the lowest, with taxes and insurance accounting for just 9% of the average monthly payment. The average principal and interest payment was $4,243, compared to $420 for taxes and insurance.
Hawaii’s low property tax rates and stable homeowner’s insurance premiums contribute to the small share. Unlike many states, Hawaii relies heavily on other revenue sources to fund schools and public services, helping to keep property taxes low as home values remain high.
Other metros with low non-mortgage costs include Morehead City, North Carolina; George, Utah; Heber, Utah; and Grand Junction, Colorado, where taxes and insurance typically account for 9% to 10% of monthly payments.
The report also noted that rising tax and insurance costs can surprise homeowners in the long run – especially for first-time buyers.
Many consumers use low-paying loans backed by government programs such as Federal Housing Administration (FHA), US Department of Agriculture (USDA) or US Department of Veterans Affairs (VA). These loans usually require escrow accounts that include property taxes and insurance in the monthly loan payment.
As a result, even borrowers with fixed rate loans may see their monthly payments change.
“Many homeowners think their payment will stay the same from year to year, but even if your mortgage rate doesn’t change, taxes and insurance often change,” says Vehige. “While you can’t control rising costs, reviewing your deficit statement, buying insurance every year and understanding your property tax appeal process can help prevent the unexpected and keep your budget on track.”
