Is Your Monthly Mortgage Payment About to Increase?

 If you signed the papers on a fixed mortgage rate for 15 or 30 years, you probably thought those payments would stay the same the entire life of the loan. Staying away from the adjustable rate mortgages gave you that piece of mind, but you could still be in for a price hike.

Don’t freak out yet! Knowing why you might be paying more can help you plan for the increase, and solve the issues this problem could create. 

Ins and Outs of Escrow Accounts – for those of you who borrowed more than 80% of the value of the house, the bank will most likely require you to get an escrow account. This account is a specific account to collect property taxes, homeowner insurance, mortgage insurance, and HOA dues; given all on top of your mortgage payments. These funds will sit in your escrow account until the bill comes. Escrow accounts are helpful to those who have trouble saving up large amounts of money for these large bills. The reason your mortgage could increase is due to what’s happening with your escrow account behind the scenes. They break down all the expenses and add them to your mortgage.

Property taxes – property taxes are one of the biggest financial burdens for homeowners. Greedy government needs, rising property values, or home improvements can lead to an increase in property taxes. Lenders will begin collecting more per month for the escrow accounts to cover their total cost as the property taxes rise. Because the property taxes are rising, so will your escrow, which in turn will lead to the mortgage payment increase. This can however, be disputed by appealing for a lower assessment amount. It’s not guaranteed to land in your favor though.

Homeowners insurance – For every mortgage, homeowners insurance is a requirement. What can make this expense rise is improving the existing area, finishing a basement, and or adding additional square footage to your property. Just like property taxes, a rise in insurance cost will cause the escrow account the rise, making your mortgage payments raise.

Lender’s error – Yes, it’s true. As professional as these people are, they are still people who make mistakes. Every now and then, they do tend to miscalculate the monthly mortgage payments, probably making an error on the property tax, or insurance escrow payments. Unfortunately, their mistakes become your problem. Because they must be paid in full, what you thought it should be doesn’t mean much. To eliminate this potential problem, do you own analysis, and create a budget of what is affordable and what is not. Knowing the correct amount to pay each month, followed by a set budget, will make any raise in payments just a hiccup and not a plummet into picnicking disaster mode.  

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