Several Illinois metro areas rank among the highest in the country for taxes and insurance as a share of housing costs. Decatur, Peoria and Rockford all appeared in the top 10 of the new report.
COLUMBIA, MO - Homebuyers often focus on home prices and mortgage interest rates when calculating affordability, but a new analysis suggests two other costs are quietly pushing monthly housing payments higher: property taxes and homeowners insurance. According to a report released March 4 by Neighbors Bank, taxes and insurance now account for an average of 21% of a homeowner’s monthly mortgage payment nationwide. The study, titled The “Hidden” Costs Causing Monthly Housing Payments To Rise, examined nearly 450 metropolitan areas and calculated typical payments using a 30-year fixed-rate mortgage at 6.59% interest.
Photo: Yan Krukau/PEXELS
Looking at buying a home? New home buyers should also pay attention to taxes and insurance in determining monthly budgets after the purchase.
Mortgage payments are commonly described using the acronym PITI — principal, interest, taxes and insurance. While principal and interest make up the core loan payment, taxes and insurance are typically collected through an escrow account and added to the monthly bill. Those costs can rise even when a homeowner’s mortgage rate stays the same. “It’s important to look beyond the sticker price and understand how taxes and insurance will shape your monthly payment,” said Jake Vehige, president of mortgage lending at Neighbors Bank. “They’re recurring costs that need to be planned for from day one.” The report found that in some areas, non-mortgage costs make up more than one-third of the total housing payment. In the highest-burden markets, taxes and insurance significantly increase the overall cost of homeownership. Several Illinois communities rank among those with the largest share of taxes and insurance in monthly housing payments. The metro area around Decatur ranked second nationally, where taxes and insurance account for about 37.4% of the typical monthly payment. In that market, the average principal-and-interest payment is about $598 per month, while taxes and insurance add roughly $357, bringing the total payment to about $955.
Top 10 Highest-Burden Markets
| Rank | Metro Area | T&I Share of Avg. Monthly Housing Payment | Avg. Monthly P&I | Avg. Monthly T&I | Total Avg. Monthly Payment (PITI) |
1 |
Pensacola-Ferry Pass-Brent, Fla. |
43.6 % |
$1,531 |
$1,183 |
$2,714 |
2 |
Decatur, Ill. |
37.4 % |
$598 |
$357 |
$955 |
3 |
Massena-Ogdensburg, N.Y. |
36.5 % |
$690 |
$397 |
$1,088 |
4 |
Peoria, Ill. |
35.7 % |
$823 |
$458 |
$1,281 |
5 |
Wichita Falls, Texas |
34.9 % |
$863 |
$462 |
$1,324 |
6 |
Elmira, N.Y. |
34.3 % |
$760 |
$398 |
$1,157 |
7 |
Miami-Fort |
34.3 % |
$2,383 |
$1,244 |
$3,627 |
8 |
Corning, N.Y. |
34.0 % |
$818 |
$421 |
$1,239 |
9 |
Rockford, Ill. |
33.9 % |
$1,048 |
$537 |
$1,585 |
10 |
Pine Bluff, Ark. |
33.9 % |
$494 |
$253 |
$747 |
Two other Illinois metro areas — Peoria and Rockford — also ranked among the top 10 nationally for the share of housing payments driven by taxes and insurance. Analysts said Illinois appears frequently in the rankings largely because of higher property tax rates compared with many other states. In contrast, some of the nation’s most expensive housing markets show a smaller share of monthly payments coming from taxes and insurance. In Honolulu, for example, those costs account for about 9% of the average monthly mortgage payment. The lower share is attributed to Hawaii’s relatively low property tax rates and stable insurance costs. Taxes and insurance can also create surprises for homeowners over time. Many first-time buyers rely on government-backed mortgage programs that require escrow accounts. Those accounts collect property taxes and insurance premiums as part of the monthly mortgage payment. Because those costs can change from year to year, a fixed-rate mortgage does not always mean a fixed monthly payment. Lenders conduct annual escrow reviews, adjusting the monthly payment if taxes or insurance premiums increase. If prior payments were too low to cover rising costs, borrowers may also need to pay an escrow shortfall. Vehige said homeowners can take steps to manage the risk of rising costs, including reviewing escrow statements annually, shopping for insurance coverage and appealing property tax assessments when appropriate. “Many homeowners assume their payment will stay the same each year, but even if your mortgage rate doesn’t change, taxes and insurance often do,” Vehige said. “Understanding those costs can help prevent surprises and keep your budget on track.”
