When most people think about buying a home, they focus on two numbers: the home price and the interest rate. But there’s a third number that has been quietly climbing across the country and right here in South Dakota…
Escrow.
At Home Team 605 pwrd by Krogman & Company Real Estate, we’re seeing more buyers surprised by how much their monthly payment really is once escrow is added in. Let’s break down what’s happening and what you can do about it.
What Is Escrow, Anyway?
Escrow is the part of your mortgage payment that covers:
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Property taxes
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Homeowners insurance
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Sometimes flood insurance or special assessments
Your lender collects this money every month and pays those bills for you when they come due. Sounds simple… until those costs start rising.
Why Escrow Payments Are Going Up
Across the U.S., escrow costs are increasing for three main reasons:
1️⃣ Property Taxes Are Rising
As home values go up, so do property taxes. Even if your home hasn’t changed, your tax bill can.
2️⃣ Insurance Premiums Are Increasing
Homeowners insurance is getting more expensive nationwide. Construction costs, storm damage, and replacement values all play a role.
3️⃣ Re-Assessments Catch People Off Guard
Many homeowners get hit with a surprise escrow shortage when taxes or insurance jump and their lender recalculates their payment.
That’s why some homeowners see their payment go up even when their interest rate stays the same.
What This Means for Buyers in Brookings
When you’re budgeting for a home in Brookings, it’s not just the mortgage rate that matters. Escrow can add hundreds of dollars per month depending on:
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The home value
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Property taxes
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Insurance costs
Two homes with the same price can have very different payments based on escrow.
That’s why we always help buyers look at total monthly payment, not just the sale price.
What Homeowners Can Do Right Now
Here are a few smart moves to stay ahead of rising escrow costs:
✔️ Shop your homeowners insurance
Rates vary more than people realize. A quick comparison can save hundreds per year.
✔️ Review your property tax assessment
If your home value looks too high, you may be able to appeal it.
✔️ Build a cushion
An escrow shortage can cause payment jumps. Planning ahead helps avoid surprises.
✔️ Talk to your lender
You can sometimes adjust how escrow is handled or spread shortages over time.
Questions for You to Think About
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Has your mortgage payment gone up even though your interest rate didn’t?
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Do you know how much of your payment is escrow vs principal and interest?
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When was the last time you reviewed your homeowners insurance?
These are important things that can make a big difference in your budget.
Final Thoughts from Home Team 605
Escrow may not be flashy, but it plays a huge role in home affordability. Rising taxes and insurance costs are becoming just as important as mortgage rates when it comes to monthly payments.
At Home Team 605, we help buyers and homeowners understand the full picture so there are no surprises.
???? If you’re thinking about buying, selling, or just want to review your current payment, let’s talk.
Posted by Shane Andersen onEnjoy this blog post? Click here to subscribe for updates
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