Climate Risk and Homeownership: How Insurance Costs Are Changing the Mortgage Landscape
- Alexi Mencio
- Sep 26, 2025
- 3 min read
Updated: Sep 29, 2025
Homeownership in 2025 comes with a new challenge that’s affecting millions of Americans: rising homeowners' insurance costs driven by climate risks. From hurricanes in Florida to wildfires in California and flooding in Texas, natural disasters are pushing premiums higher than ever before.
For borrowers, these rising costs don’t just strain monthly budgets — they can also affect whether a mortgage application gets approved. At Trust Lending, we’re seeing more cases where insurance costs are reshaping the path to homeownership.
Why Insurance Costs Are Rising
Insurance companies base premiums on risk, and that risk is climbing in many regions due to:
Increased frequency of natural disasters (hurricanes, wildfires, floods).
Higher rebuilding costs due to inflation and labor shortages.
Tighter insurance markets — in some states, major insurers have pulled back coverage entirely.
For homeowners, this means yearly premiums that once cost $1,500 could now exceed $5,000–$8,000 depending on location and property type.
The Impact on Mortgage Borrowers
When applying for a mortgage, lenders don’t just look at the principal and interest payment — they also include taxes and insurance (T&I) in the calculation.
That means higher insurance costs can:
Reduce affordability: A higher premium increases the total monthly housing payment.
Affect debt-to-income ratios (DTI): Even if the loan rate is favorable, a high insurance bill can push a borrower’s DTI above lending limits.
Block approvals: In some cases, insurance premiums alone have been the difference between an approved and a denied loan.
Regional Hotspots: Where Borrowers Feel It Most
Florida: Hurricane risk + insurers exiting the market = premiums that have doubled or tripled in just a few years.
Texas: Flood-prone areas near the Gulf and wildfire risk in the west drive higher costs.
California: Wildfires have made some properties nearly uninsurable without state-backed programs.
Borrowers in these regions must plan carefully to keep their homeownership goals on track.
Strategies for Borrowers
If you’re a borrower facing rising insurance costs, here are practical steps:
✔ Shop insurance early: Don’t wait until closing — compare quotes in advance.
✔ Consider mitigation: Adding storm shutters, fire-resistant roofing, or flood barriers can reduce premiums
✔ Budget realistically: Factor in insurance increases when deciding what you can afford.
✔ Explore state-backed plans: Some states offer last-resort coverage programs for high-risk areas.
✔ Work with a knowledgeable lender: A lender familiar with insurance challenges can help structure a loan to fit within approval guidelines.
How Lenders Like Trust Lending Can Help
At Trust Lending, we go beyond just running numbers. We:
Guide borrowers on how insurance premiums affect mortgage qualification.
Work with brokers to identify loan products that can better absorb higher T&I costs.
Provide scenario analysis so borrowers can see the difference between property options in different areas.
By staying ahead of these industry challenges, we ensure borrowers and brokers have clear, proactive strategies.
Planning Ahead Is Key
Rising insurance costs are more than just a budget issue — they’re reshaping the mortgage landscape. For borrowers, especially in states like Florida, Texas, and California, it’s critical to plan for insurance expenses just as carefully as mortgage rates.
At Trust Lending, we help families and brokers navigate these challenges with expert guidance and smart financing strategies.
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