Going through some of the recent search terms that have brought people to PIAC, one inquiry stood out from the rest.

Sadly, I’m pretty sure that all of the folks that have stumbled upon this site looking for the answer have left empty handed wondering why they just wasted a few seconds of their life on a goofy site called something like “Pig in a Pan”.

While I’m sure that I’ve tiptoed around the perimeter of the answer in my PMI and Homeowner’s Insurance posts, I’m not certain that I’ve ever actually just flat out answered the question: Why did my fixed rate mortgage bill go up?

The answer lies in the escrow account set up, usually at closing, by the mortgage company you hold your mortgage with.

Money held in the escrow account is paid by the lender on your behalf. Things like property taxes, homeowners insurance, and private mortgage insurance (ugh!) are the main things paid out of the account.

So, while the principle and interest portion of your mortgage is “fixed”, the escrow portion is not.

Why not?

Well, it often varies from year-to-year because tax assessments and insurance premiums bounce around from year-to-year. Usually they go up, right? Taxes always seem to go up.

The cool part in the case your taxes go up, or whatever, is that the lender will typically cover any shortfalls in the escrow account. That is, until they can adjust your monthly payment — which they call an escrow analysis which is usually done annually, often the same month that you originally took on the mortgage.

As a real world example, when I first took on my mortgage in 2002, my “fixed” monthly payment was somewhere around $1100 per month.

But one month in to the mortgage, Allstate Insurance dropped my homeowners policy. Behind property taxes, the largest chunk of my original “escrow account” was based on Allstate’s homeowners insurance premium.

As I scurried to find replacement coverage I quickly learned that homeowner’s insurance premiums can vary widely. With Allstate, my yearly premium was around $450. On the Fair Plan, which I was forced to resort to, my premium was nearly $1000. Over double.

Now for the next 11 months, my mortgage payment remained at the original $1100. Unbeknownst to me, at the time, my mortgage company was covering the shortfall in my escrow account.

Then came the mortgage company’s annual escrow review on my account 12 months after I had moved in. My next mortgage bill was around $1350?!

At first, having grown accustomed to paying $1100 each month, I was flabbergasted. How could this be? How could they raise my monthly bill by over $250. This was a fixed mortgage! They couldn’t do that, could they?

To get my answer, all I had to do was read page 2 of my mortgage statement. It took me nearly a week to do this — I’m embarrassed to admit. The additional $250 was to cover the shortfall from the year before and also to ensure that they wouldn’t have to “spot” me the difference in the following year. Make sense?

That second year was rough. It wasn’t in my budget to have a $1350 mortgage payment.

That’s why it was a pleasant surprise when, 12 months later, my mortgage bill went down to $1200. This was because I was no longer covering a shortfall from the previous year.

Still, it was more than my original mortgage bill but less than what I had been paying. The quick up and then down experience in the first two years of my mortgage made it all click for me.

Hopefully this example helped it click for you too!

As a side note, for most folks, the insurance premium stays pretty constant, it’s the tax assessment that gets you…

For the past 4 years running, it’s been a series of tax hikes that have kept my bill going higher and higher…


  1. Explain this one 2 me. Fixed rate went from 3,500 to 5,000 thats right 1,500 dollars MORE!!!!!!! Needless to say we couldn’t afford THAT MUCH of a jump so we are filing BK and losing our home. So much for the ‘AMERICAN DREAM”!

  2. Hi Clarissa — for a jump like that to occur, it’s very unlikely that you actually had a fixed-rate mortgage.

    Chances are, it was “fixed” at a low teaser rate for a few years and then “adjusted” to make up the difference. A re-assessment and tax adjustment just aren’t going to add up to $1500 extra per month.

    It sucks that you’re on the road to losing your home but you have to keep things in perspective — a home with a $3500/month mortgage bill, in my opinion, is well beyond the “AMERICAN DREAM” and chances are, it was also beyond your means too. :0(

  3. We just had this happen to us. We had a $812 (fixed rate) monthly payment that went up to (and fluctuates) $1150 a month. We have 2 small babies and this is really hurting our family. I really hope next year is better. Things have been so rotten for us. :/

  4. This is crap! we went with a fixed because I wanted to know what our payment would be for the next 30 yrs and not have to guess and wonder and hope we could afford it, didnt know fixed isnt fixed at all!! we havent had a big jump “yet” just an extra 30 bucks two yrs in a row, its only went down once and that was after the first yr! guess we better count our blessings it hasnt gone up a 100! still sucks though!

  5. wow, this really explained things well. 6 months after my husband and I bought our house our mortgage went up $65. Not terrible, but we understood. Well, another year later our mortgage just went up another $150. $220 total from when we bought the house 1.5 years ago. Tough break 🙁 Thanks for explaining this so well. We are about to adopt a baby so it kind of stinks, but God always provides! We’ll just cut back on other things.

    • The only way I can think that would cause this is that your Homeowners Insurance premium must have skyrocketed…

      Also, where do you live? I didn’t think property taxes *ever* went down. 😉

  6. My bank keeps telling me that the escrow account and the mortgage have nothing to do with each other. My house insurance and taxes are all included in the mortgage. Talking to the people in the mortgage dept are like talking to lawyers. Hello if it didn’t have anything to do with my mortgage why is my mortgage going up every year HELLO.

  7. Is there anything we can do to lower it? I’m guessing (embarrassed to admit, I haven’t read my entire statement either-yet. ) our in tease is from escrow shortage but am not positive. Our payment has gone up over $100 do two years in a row now. You add a new baby to the expenses and we are flat broke and starting to dig. This is NOT what we envisioned when moving.

  8. in all actuality they CANNOT raise your rate if it clearly says “fixed rate” if they raise the fixed rate it is a fruad meant to decieve….if anyone is interested check out the meanings of your certificate of birth A4V (accepted for value) your name and social security number…..they arent what you think they are…….its not a conspiracy either its legitimate information…..just make sure you do it right..it can bite you in the ass….
    a bank cannot carry a note longer than 9 months..so if they call it a note its falsifying documents….ALSO the paper work you signed at closing was most likely ALTERED AFTER YOU SIGNED IT…..so anyhting that happens after you signed it was not done by your consent…..espcially if any of it was done in ALL capital letters….Read about what i mentioned you’ll understand…..

  9. Just checked my escrow analysis online and was devastated to see my monthly payments going up by$240 month. It’s such a bad time for this to happen. I never knew a fixed mortgage can go up this much. I’m guessing property taxes increased with the economy recovering. I just fought a battle with cancer and won, thank God but bow I have a son graduating going to colleg in Fall and I’m a single mom. I’ve always been cautious with my money and rarely splurged on this but so much seems to be piling on with student loans, college for my son, car py,t, home repairs. I can’t even afford dental work. This is not an American Dream this is a Slave Nightmare. Greedy corporations how much money do ou us really need? How much is too much for billionaires who must see an annual profit at all cost. Immigrants aren’t ruining this country it’s greedy corporations. I don’t even go put for dinner and movies on weekends anymore. Just stay in watch basic cable and Netflix. The middle class in this country had better start standing up or we are going back o Downton Abbey days with indentured servants.

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