Half of Mortgage Holders Have Struggled to Pay Their Mortgage in Full

A new LendingTree survey reveals that half of mortgage holders have seen their monthly payments rise in the past two years, and many are having a hard time keeping up.

LendingTree said the survey found:

• 50% of Americans with a mortgage say their payment increased in the past two years. That includes 22% who say it increased significantly. Among those whose payments increased, 87% say they were surprised, including 44% who were extremely surprised. As for the cause, among those who saw an increase, 59% cite higher property taxes, 40% cite escrow shortages, and 39% cite higher homeowners insurance costs.
• Some mortgage holders are struggling to make their payments. 50% say they’ve been unable to make their full mortgage payment at least once in the past year. That strain is also reflected in the 59% who consider themselves “house poor,” with 32% saying they’re definitely house poor.
• Younger mortgage borrowers are feeling the most pressure. 81% of Gen Zers and 59% of millennials have been unable to make their full mortgage payment at least once in the past year, compared with 43% of Gen Xers and 14% of baby boomers. Similarly, 73% of Gen Zers and 67% of millennials say they’re house poor, compared with 49% of Gen Xers and 41% of baby boomers.

LendingTree noted that higher costs are forcing mortgage holders to make significant financial trade-offs and take on debt.

It said that among those with an increased payment, 27% have cut back on everyday spending, 21% have worked additional hours or taken a second job, and 20% have reduced or skipped vacations or travel.

The website notes that, overall, 41% of those with higher payments saw increases of $200 or more.

Homeowners Caught Off Guard

LendingTree reported that half (50%) of Americans with a mortgage say their payment has gone up over the past two years, and for 22%, that increase has been significant.

Notably, 87% of mortgage holders whose payments increased say they didn’t see it coming, and that 44% describe themselves as extremely surprised.

LendingTree said property taxes are the most common culprit and were cited by 59% of those affected. Property taxes were followed by escrow shortfalls (40%) and higher homeowners insurance premiums (39%).

Other common reasons include:

• Their adjustable-rate mortgage interest rate increased (20%)
• Private mortgage insurance (PMI) was added or increased (14%)
• Their flood insurance or another required insurance premium increased (12%)
• A temporary payment reduction, forbearance, or assistance arrangement ended (9%)
• Their loan was modified (6%)
• Another required charge increased (4%)
• Unsure why their payment increased (2%)
• Other (1%)

A slim majority of mortgage holders (53%) said they understood well when they took out their mortgage that their payment could shift because of taxes, insurance, or escrow. Another 28% said they somewhat understood, while 11% heard it could happen but didn’t understand it.

When asked which factor is most responsible for driving their increases, 44% pointed to property taxes, 32% to homeowners insurance, and 9% to escrow shortages, LendingTree noted. Property taxes are the cost that mortgage holders most often say they underestimated (22%), followed by homeowners insurance (21%) and home maintenance and repairs (17%).

Matt Schulz, LendingTree Chief Consumer Finance Analyst and author of “Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life,” said changes in mortgage payments are an unfortunate reality that more mortgage holders should anticipate.

“So many people just assume that their mortgage payments don’t change, so they just don’t pay that much attention to it,” he says. “Unfortunately, little could be further from the truth, which many people are finding out the hard way. One of the best ways to soften the blow is to have a home expenses fund that you can tap into. You might think a fund like that would be more for repairs and maintenance, but there’s nothing that says those funds can’t help you handle mortgage payment increases, too.”

Looking ahead, 40% of mortgage holders expect their payment to hold steady over the next two years, but 29% expect a moderate bump. Another 16% are bracing for a significant one. Still, most mortgage holders (68%) have a fixed-rate loan that shields them from rate-driven swings, though 19% have an adjustable-rate mortgage, which leaves them more exposed.

Half of Mortgagees Have Fallen Behind at Least Once

Higher payments are affecting mortgage holders’ ability to pay, with half (50%) of mortgage holders saying they’ve missed a full payment at least once in the past year, with 13% missing payments three or more times.

50% of U.S. mortgage holders say they were unable to make their full mortgage payment by the due date, LendingTree noted.
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Also, LendingTree noted that 59% consider themselves “house poor,” including 32% who say they’re definitely house poor, not just occasionally stretched thin.

Schulz believes that’s more that many Americans are really struggling in the wake of high prices and high interest rates.

“These things have shrunk many people’s financial margin for error down to next to nothing, and that’s a scary spot to be in,” he said. “If you’re struggling to make a full payment, seek help. Reach out to your lender. They likely have programs to help people struggling with a short-term financial pinch, but you won’t know if you don’t seek them. The sooner you reach out, the better. Lenders are much more likely to work with you in anticipation of future missed payments than in the wake of multiple already-late payments.”

Gen Z and Millennial Mortgage Holders

LendingTree noted that younger generations are shouldering a disproportionate share of the pain.

According to LendingTree, 81% of Gen Z mortgage holders ages 18 to 29 and 59% of millennials ages 30 to 45 said they’ve missed a full payment at least once in the past year, compared with just 43% of Gen Xers ages 46 to 61 and 14% of baby boomers ages 62 to 80.

The house-poor gap is similar, LendingTree noted, with 73% of Gen Zers and 67% of millennials telling it that they’re house poor, versus 49% of Gen Xers and 41% of baby boomers.

Parents with children younger than 18 are similarly struggling, with 64% saying they’ve missed a full payment and 46% conclusively calling themselves house poor.

Schulz said he believes there are a few reasons why younger mortgagees might be struggling.

“These age groups might be at greater risk because they’re not making as much money and don’t have as strong credit as their older counterparts,” he said. “That’s a challenging combination, and the lower credit scores are a particular problem. Lower scores mean worse terms on mortgages, possibly including higher interest rates, more fees, bigger monthly payments, and so on. Combine that with lower incomes and less financial margin for error, and things can get dicey in a hurry.”

Some mortgage holders are making real sacrifices, LendingTree said. Among those whose payments have gone up, 27% have cut back on everyday spending, 21% have picked up extra hours or a second job, and 20% have scaled back or skipped vacations and travel.