Recently, many homeowners have experienced significant increases in their property taxes and insurance premiums, impacting their monthly housing costs.
Research shows homeowners insurance rates jumped by double digits in 2023, with some states experiencing increases of up to 23.3%. Additionally, the surge in real estate values by 40% between 2019 and 2023 has accompanied the median single-family property tax bill rising by 24%.
This trend affects homeowners in all states, including those we serve: CT, DE, IL, MA, MD, MI, NJ, OH, PA, RI, and WI.
It’s important to remember that for SUN clients, you are required to pay your mortgage loan repayment, insurance and property taxes all together in one bill each month. Your monthly mortgage amount is fixed, meaning it will not go up and down. However, property taxes and insurance premiums regularly change, and those costs are not managed by BlueHub SUN. Your homeowner insurance company sets the rate for your home insurance and your city or town sets the rate for your property taxes. And if you live in a condo, your homeowner association dues, set by your homeowner association, can also be included in your payment.
It's essential to understand why these costs are rising, how they impact your escrow payments, and what you can do to stay informed and manage these changes effectively.
Rising Property Taxes
Property taxes can increase for various reasons, often linked to local government needs and economic conditions. Municipalities rely on property taxes to fund essential services such as schools, infrastructure, and safety and emergency services.
Property taxes have significantly increased in Illinois, for example, due to property value reassessments and increases in local budget demands. Across the state, homeowners have faced notable tax hikes, with the typical property tax bill rising by $756 over the past five years.
Local governments periodically reassess property values to ensure they align with the current market, which can lead to higher tax bills if property values have increased along with local budget needs. This reassessment process can be a significant driver behind rising property taxes for individual homeowners. Ignoring notices from your town about reassessments can lead to unexpected jumps in your bill. Always review these notices and understand their implications. If you believe your assessment may be wrong, you may have the right to appeal your local government’s valuation. There is usually a specific period within which appeals must be filed, and it often involves providing evidence that the assessment is incorrect.
Increasing Insurance Premiums
Homeowners insurance premiums have been on the rise due to several factors, including the increasing frequency and severity of natural disasters, inflation and higher rebuilding costs.
Premiums in areas with frequent hurricanes, flooding and damaging storms have risen by 50%. In states we serve, such as Connecticut, Massachusetts and Rhode Island, severe winter storms and coastal flooding contribute to higher insurance premiums.
In 2023, the average increase in homeowners insurance across the U.S. was around 11%. These increases can significantly impact your escrow account, which is designed to manage property taxes and insurance premiums, ensuring these bills are paid on time without you having to handle them directly.
The Impact on Your Escrow Account
Your escrow account contains the funds required to pay your homeowners insurance and property tax bills (and your condo association, if applicable) when they come due. The account is managed by your mortgage loan servicer (Dovenmuehle Mortgage, Inc. for SUN clients). Each month a portion of your future tax and insurance bills are collected and deposited into your escrow account. The amount collected is calculated so that when your insurance and tax bills come due, the escrow account contains the full amount required to pay what is owed. When costs increase, more money needs to be collected each month to pay the bill in full, therefore the amount collected from you in your monthly payment also increases. Monitoring your escrow account statements and understanding these changes are essential to managing your overall housing expenses.
Proactive Steps to Manage Rising Costs
- Open Your Mail: Always open and review any notices from your town or insurance provider. These documents contain vital information about changes that can impact your finances. Additionally, your loan servicer, Dovenmuehle Mortgage, Inc., will routinely conduct analyses of your escrow account and mail your letters to notify you if your monthly payments are going up or down due to changes in taxes or insurance. Consistently opening and reading these letters will ensure that you are aware of changes to your bill before they occur.
- Understand Your Bills: Take the time to understand the components of your property tax and insurance bills. Knowing what each charge is for can help you better anticipate and manage increases.
- Shop Around for Insurance: Regularly review your homeowners' insurance policy and shop around for better rates. Websites like Policygenius offer tools and resources to compare insurance options and potentially save on premiums. Additionally, organizations like AARP offer members discounted rates, which could help reduce your insurance costs further.
- Appeal Property Tax Assessments: If you believe your property has been overvalued, you can appeal the assessment. Check with your local tax office for the process and deadlines.
Leveraging Your Capital Reserve Account for Significant Expenses
BlueHub SUN mortgages feature a unique component—a Capital Reserve Account--designated for unexpected housing costs. This fund is set aside to help manage surprises that homeownership might throw your way, such as new gutters or roof repairs. This account can potentially be used to offset any escrow shortage you may have.
If you don’t have a capital reserve account or are unsure, please contact us at 855.604.HOME or info@sunhomehelp.org with any questions.
Watch this video to learn more about the Capital Reserve Account.
