Why Does My Mortgage Payment Keep Going Up After a Few Years?

You’ve been faithfully paying your mortgage for a couple of years without incident, but now you look and see that the figure is higher. This surprise increase can be annoying and unsettling when you assumed you’d agreed to a set figure. Why does my mortgage payment keep going up? Knowing this will make it easier to budget your finances and eliminate surprises.

A number of things could make your mortgage payment change from year to year, even if you’ve got a fixed-rate mortgage. If your mortgage payment keeps going up, you may wonder which factors are contributing. Allow BrickWood Mortgage to examine the most common difficulties and what you can do about it.

How Payments on a Mortgage Work

Your monthly mortgage is typically composed of four big parts, which are often referred to as PITI: Principal, Interest, Taxes, and Insurance. While your principal and interest are set with a fixed rate mortgage, taxes and insurance pieces change annually.

The principal reduces your debt from a loan, and interest pays a lender. These two figures do not change within your term of a loan if you have a fixed rate. Your property taxes and insurance premiums are drawn from an escrow account, however, and these can change from year to year.

Typical Reasons Why Payments Are Increased

Property Tax Revaluations

Local authorities review property valuations from time to time to set tax liabilities. When your house is revalued upwards after a previous lower valuation, its taxes will also be higher.

These rates themselves can even vary if municipalities require more money to finance schools, streets, or government services. Even if nothing changes in the value of your property, higher rates can result in higher tax figures.

Insurance Premium Variations

Homeowners insurance premiums can go higher because of various considerations such as inflation rate, higher claims experienced in your area, or revaluation of risk by your insurer. Natural disasters, even if indirect to your residence, can drive regional insurance rates upwards.

If you’re in a flood-prone area, flood insurance premiums may rise, particularly if FEMA updates flood maps or adjusts rates.

Escrow Account Shortages

Your lender reviews your escrow account once a year to make sure that you have enough money to make coming tax and insurance payments. Should a deficiency result because taxes or insurance premiums came in higher than anticipated, your lender will raise your monthly payment to make up the shortfall and accumulate a suitable margin to apply during the subsequent year. If your mortgage went up, it’s often because of an escrow shortage due to one of these reasons.

Managing Your Mortgage Payments

Review Your Annual Escrow Statement

Your lender annually sends an escrow analysis of how your dollars have been spent and whether or not adjustments are required. Go through this statement closely to understand precisely why your payment has been different and to confirm calculations are accurate.

Challenge Property Tax Assessments

If you think that your property was overstated upon reassessment, you have a right to appeal. Collect evidence of similar house sales or property defect problems that could justify a lower assessment. This is a successful method that many homeowners have used to lower their taxes.

Shop for Better Insurance Rates

Insurance costs can vary significantly between providers. Regularly compare quotes from multiple insurers to ensure you’re getting competitive rates. However, don’t sacrifice necessary coverage just to save money.

Work with a Mortgage Specialist

Prior to making important decisions regarding your mortgage or a potential refinance, speak to an experienced mortgage broker at BrickWood Mortgage. We will be able to inform you about your options, as well as whether adjustments to your payment plan make financial sense. Consulting with South Carolina FHA lenders, for example, will allow you to receive tailored advice.

Our mortgage brokers can also help you explore opportunities if payments have been unaffordable, as well as refinancing opportunities or re-structuring of loans.

Take Control of Your Mortgage

Though increasing mortgage payments can be a source of discomfort, knowing what is driving it enables you to make suitable adjustments. Monitoring your escrow account regularly, keeping up to date about regional tax adjustments, and keeping close contact with your lender and broker will allow you to prevent surprises and keep your home’s expenses under control.