Here's Why My Housing Costs Keep Going Up, Even With a Fixed-Rate Loan

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  • I have a fixed-rate home loan, so my mortgage payment doesn't change.
  • But my housing costs still increase almost every year, thanks to my property taxes and insurance climbing higher.
  • It's important to consider these costs (and how they will increase) when deciding how much house you can afford to buy. 

I have a fixed-rate mortgage on my home and I've been paying down my loan for quite a long time. One of the benefits of buying a home using a fixed-rate home loan is that the rate doesn't change, so principal and interest remain the same for the life of the loan. The stability of mortgage costs is actually one of the best reasons to buy a home as you don't have to worry about rent going up. 

But, despite the fact that my mortgage costs don't change year over year, my housing costs keep going up annually. Here's why. 

Other costs go into your monthly housing payment

There's a simple reason why my housing costs keep increasing each year despite the fact that my mortgage payment stays the same. 

The issue is that my principal and interest on my home loan is not the only cost I absolutely must pay as a homeowner. I am also required to pay for property taxes, home insurance, and a homeowner's association fee that is mandatory in my neighborhood. And, unlike my mortgage, these other costs were not set in stone at the time when I bought the house.  

My property tax bill has increased significantly over the years, sometimes going up thousands of dollars in a short period of time. My HOA has also raised the dues I owe on my property, and my home insurance has gone up as well during most years, although the insurance premium increases have been more modest since I haven't made any claims. 

Each of these costs have to be factored into my monthly payments so that I can pay the insurance and property tax bill when they come due. In many cases, these costs are literally part of the required mortgage payment you have to make. This is because lenders generally require you to pay money toward these expenses each month, which the lender puts into an escrow account

As these costs have increased, I end up with a bigger housing bill even as the part of my mortgage payment going directly to paying the loan down stays stagnant. 

Don't forget about property taxes and insurance when deciding how much you can afford

The fact that my housing costs have gone up each year due to these costs is annoying to me -- but it has not put a big strain on my finances because I was well aware that this could happen when I purchased my house. I know my monthly costs go beyond just the mortgage alone and I prepared for the fact that these expenses could go up.

Unfortunately, it's easy to forget about the fact that property taxes, insurance costs, and HOA dues don't come with guarantees they won't change -- and it's much more likely that they will increase rather than stay stagnant. Anyone who is considering whether a given house is affordable for them or not should remember to take these additional expenses -- and their likely future increases -- into account when making their choice.

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