Skip to content
The Hidden Cost of Homeownership: Taxes and Insurance
When most people think about the cost of owning a home, they focus almost entirely on the monthly mortgage payment. But there’s another piece of the puzzle that’s growing faster than many homeowners realize: your escrow account.
If your loan includes escrow, every month you’re also paying into a fund that covers property taxes and homeowners’ insurance. These aren’t fixed costs like your mortgage principal and interest—they rise, and lately, they’ve been rising a lot.
Taxes and Insurance: The Silent Budget-Busters
- Property Taxes: Across the U.S., property taxes increased by an average of 7% in 2023 alone (2024 was 2.7%, 2021-2023 was 10.4%). In some states, like California and Florida, the rise has been even sharper. Louisiana, for example, increased 35% in 2024, and is expected to increase another 27% in 2025, bringing the average policy cost to $14k.
- Insurance Premiums: According to the Insurance Information Institute, homeowners’ insurance premiums jumped more than 26% nationwide between 2022 and 2024.
- Florida’s Crisis: In South Florida, insurance costs have doubled or even tripled for many homeowners due to storm risk and insurer pullouts. The average homeowner is now paying over $6,000 per year in premiums, that’s $500/month just for insurance. For example, Miami can range from $7500-$17,000 per year.
- California’s Crunch: Wildfire risk has pushed premiums sky-high, with many major insurers pulling back from new policies. Some homeowners in high-risk areas are now seeing annual premiums that can exceed $5,000 in certain areas, nearly as much as a mortgage payment.
- Louisiana’s Crisis: Severe weather, rising building costs, insurer exodus, and skyrocketing reinsurance costs have pushed Louisiana to be the second most expensive state in the country, with some experts predicting the average rate to be around $14,000 a year.
Why This Matters to You
When you calculate what you can afford, you can’t just look at the mortgage. That $2,500 monthly mortgage could quickly balloon into $3,200 or more once you factor in escrow—and it won’t stop there. Taxes and insurance rarely ever go down; they usually only go up.
Takeaway: Do the Math Before You Buy
Before signing a contract:
- Determine what the property taxes will be based on the list price of the property.
- Determine the insurance premium based on list price for that address? (Call for quotes).
- Determine the trend in the area you are purchasing.
Knowing these numbers up front can save you from financial shock later—and keep you from becoming house poor.
Final Thought
Your mortgage might be the biggest line on your monthly budget, but it’s not the only one that matters. Escrow—especially property taxes and insurance—has become one of the fastest-growing costs of homeownership.
In high-risk states like Florida, Louisiana, and California, it’s not uncommon for escrow to rival or even exceed the principal and interest of your loan. The best defense? Do the homework now and plan for future increases.
