If you were under the assumption that once you closed on your mortgage that your mortgage payment was going to stay the same forever, you would unfortunately be mistaken. There are many different reasons for your Mortgage Payment Increase and we will look at the culprits in this article and hopefully you can plan ahead for these. If you don’t plan ahead for these items, you will be left with a higher payment and not knowing why. One misconception is that you have a fixed-rate mortgage instead of an adjustable-rate mortgage, so there is no reason for your payment to change. This is actually partially true in the sense that with a fixed-rate mortgage the part of your payment allocated to principal and interest will never change over the 30 years.
However, if you borrowed more than 80% of the value of your home most of the lenders you use will require you to establish an escrow account. If you don’t know, an Escrow Account is a separate bank account used by your lender to pay your property taxes and insurance. What you will find is after your principal and interest is paid, the remaining will go into an escrow account. From this account there will be disbursements made to your local county for property taxes and your insurance company for insurance premiums, normally annually. If you aren’t the best at budgeting your finances, then an escrow account can help you allocate the proper amount of money on a monthly basis, but you still need to be aware of items that can make your Mortgage Payment Increase.
Normally the largest amount of money allocated in your escrow account is for property taxes and it is only fitting that this is the first item that can make your Mortgage Payment Increase. If you are living in an area with higher home prices then you could even be more at risk for a substantial Mortgage Payment Increase. If it is deemed that the properties in your area are increasing in value, the county assessor will value your home higher thus causing your property taxes to increase as well. When the new property tax bills come out, the escrow account will adjust accordingly once a year to take these increases into account. You may actually see your escrow account go negative, especially if you buy new construction. Since the property history is vacant/farm land, the taxes on it are quite low, but when the parcel is created and there is a house on the property, the property tax goes up tremendously. This Mortgage Payment Increase could potentially be categorized as a lender error, but it is not legal for the lender to hold in escrow more than what they have evidence to charge you. If all the evidence they have is the most recent property tax bill, that is what is going to be used. You can dispute your property taxes, but you would need to contact your local county to determine the exact process needed.
Another way that Mortgage Payment Increase can happen is through your homeowner’s insurance. This can happen for a variety of reasons, but you will see an increase in your required escrow amount if your policy increases in price. Your policy will almost always increase annually, even if you don’t change anything. However, you can push a Mortgage Payment Increase if you finish a basement or add square footage to the home resulting in more home to insure. As the overall value of your home increases, your policy will do so accordingly. If your insurance policy jumps in price, you can always shop around for a cheaper rate, but ensure that the coverage you are getting is satisfactory to your needs. In any event, contacting a professional is key.
As you can see there is a few ways you can witness a Mortgage Payment Increase and most of the time you should be able to determine why it happened, but if you aren’t 100% sure, then you need to call me and we can go through it. You can reach me at my direct line of 888-900-1020, firstname.lastname@example.org, or visit www.loanconsultants.org.