Why Did My Mortgage Payment Go Up?
Understanding Changes in Your Monthly Mortgage Payment
It can be surprising and frustrating when your monthly mortgage payment suddenly increases. There are a few common reasons for this, and understanding them can help you plan your finances accordingly.
Taxes
Escrow accounts are typically set up when you get a mortgage. Your lender collects a portion of your monthly mortgage payment and places it in this account. This money is then used to pay your property taxes and homeowners insurance premiums when they come due.
If your escrow account doesn't have enough money to cover these costs, you'll have an escrow shortage. Your lender will then increase your monthly mortgage payment to replenish the escrow account. This is done to ensure that your property taxes and insurance premiums are always paid on time.
How to Verify the Reason for Your Payment Increase
It can be surprising and frustrating when your monthly mortgage payment suddenly increases. There are a few common reasons for this, and understanding them can help you plan your finances accordingly.
Taxes
- Property Tax Increases: Local property tax rates can change over time, often leading to higher payments.
- Reassessment: If your property's assessed value has increased, your property tax bill will likely follow.
- Insurance Premium Increases: Insurance providers may adjust their premiums based on various factors, such as claims history, inflation, or changes in coverage.
- Policy Changes: If you've made changes to your insurance coverage, such as adding or removing riders, this could affect your premium.
Escrow accounts are typically set up when you get a mortgage. Your lender collects a portion of your monthly mortgage payment and places it in this account. This money is then used to pay your property taxes and homeowners insurance premiums when they come due.
If your escrow account doesn't have enough money to cover these costs, you'll have an escrow shortage. Your lender will then increase your monthly mortgage payment to replenish the escrow account. This is done to ensure that your property taxes and insurance premiums are always paid on time.
How to Verify the Reason for Your Payment Increase
- Contact Your Mortgage Servicer: Reach out to your mortgage servicer to get a detailed breakdown of the reasons for the increase.
- Review Your Mortgage Statement: Your statement should outline the specific amounts allocated to taxes, insurance, and principal and interest.
- Check Local Property Tax Records: Verify if there have been any changes to your property's assessed value or local tax rates.
- Review Your Mortgage Statement Regularly: Stay informed about the status of your escrow account and any changes in your taxes or insurance.
- Consider Refinancing: Speak with your loan officer on whether a refinance could help you to lower your interest rate and save money on your monthly payment.
- Budget for Potential Increases Each Year: Factor in potential tax and insurance increases when creating your annual budget.
- Shop for Insurance: Compare quotes from different insurance providers to see if you could save money.