My game is running 60fps (Because I'm using a 60hz monitor) but if I would use a 85hz monitor it would be running 85fps. My question is if update is called based on the screens refresh rate or if its limited to 60 calls per second
As far as I know, the fixed timestep in Monogame is 60 per seconds, regardless of the monitor refresh rate. The statement "it runs 85fps because my monitor refresh rate it 85hz" is false.
It just tries to give you 60 updates per second. It cannot guarantee it does, therefore using logic based on elapsed gametime is the best way to go.
If you want another timestep than 60, change the property
TargetElapsedTime to the desired value. Again, this is unrelated to the refresh rate of your monitor since you can set the value yourself.
Read this http://blogs.msdn.com/b/shawnhar/archive/2007/07/25/understanding-gametime.aspx for more information on how it is implemented in XNA (Monogame is based on this).