My Market Value Decreased: Can I Expect to Pay Less on My Mortgage?

Your mortgage payment may go down if your home's value decreases.

Your mortgage payment may go down if your home's value decreases.

Home values can fluctuate considerably, and you may have noticed that your monthly mortgage payment also rises and falls a little even if you have a fixed-rate mortgage. Even though a decline in your home’s value does not necessarily equate to a lower mortgage payment, you could pay a little less each month if you allow your bank to pay property taxes on your behalf.

Mortgage Payment Components

Your monthly mortgage payment covers more than just the balance you owe on your home. That payment goes toward your loan principal and the interest on that principal. If you have an escrow account with your lender, a portion of your monthly mortgage check goes into that account so that your lender can pay your property taxes and homeowners insurance. The mortgage industry refers to these four components collectively as principal, interest, taxes and insurance, or PITI.

Lower Value

Even if your home’s value decreases, your mortgage principal will not. Similarly, you will not pay any less interest on that principal, unless you have an adjustable rate mortgage that happens to adjust to a lower rate at the same time your home's value decreases. Because property taxes typically are tied to the value of your home, you could find yourself paying lower taxes if your home's value declines. Because your mortgage payment includes payments toward your annual property tax bill via the escrow account, these lower taxes could lead to a lower mortgage payment.


Even though consumer mortgages often include PITI, certain mortgages only cover principal and interest. If your lender allowed you to opt out of escrowing your taxes and insurance, you will not notice a lower mortgage payment if your market value declines. This is because you are in charge of paying your taxes and insurance in their exact amounts as they are due, so there is no prepayment done through an escrow account. For borrowers with an escrow account, lenders often will refund any unused escrow balance after paying your annual property tax bill.


Property taxes typically are factored as a percentage of your home’s value, and mortgage lenders divide the entire property tax bill across the 12 monthly mortgage payments you make over the course of the year. For this reason, the amount of the decrease in your mortgage payment will depend on your local tax rate, and the reduction could be small even if your home's value significantly decreases. Also, depending on your lender’s policies, you may not notice the decrease in payment right away. Often, your monthly mortgage payment is based on the previous year's tax bill. For this reason, you may not pay less on your mortgage payment until more than a year after your market value decreases.

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