Why My Mortgage Payment Went Up By $500

There are very few things that will start your day on the wrong foot quite like opening your loan letter and finding that your housing costs have gone up significantly. We get calls on a regular basis at BrickWood Mortgage from worried clients who are asking us the same thing. That is, they want to know why it is that they have noticed that something very large has disrupted their regular pattern, especially considering how mortgage rates in SC have fluctuated recently.

Comprehending Adjustable-Rate Mortgages

The first and most likely reason for a large payment increase is associated with your loan structure. You may have signed up for an adjustable-rate mortgage. During that time, your rate may have been set for a specific period, like five, seven, or ten years. After completion of that period, your rate changes on an annual basis – sometimes leading to a situation where ‘my mortgage payment went up by $500’ or even more.

If your rates are higher at present compared to when you borrowed, your monthly payments will increase. We frequently encounter customers who have enjoyed a period of stability for a decade, and then find themselves staring at the harsh realities when that introductory period ends. You could be looking at an increase of several hundred dollars on your monthly statements, depending on your loan size. When clients call us asking, “my mortgage payment went up – what happened?”, we help them understand the changes behind these increases.

Escrow Accounts

But even with a fixed-rate loan, your total monthly payments can vary. Typically, it will be because of your escrow account. Lenders usually combine your loan payments with your property taxes and homeowner’s insurance. And they set aside these additional payments into an escrow account. It will be for payment upon due dates for your respective bills.

We have determined that this scenario represents the most common reason for an escrow payment shock. As a result, if your local government adjustment changes your property value and thus your taxes, or your insurance company increases your rates based on rising replacement costs, your lender automatically pays the larger amount. For some homeowners, this is often the answer to the question of why my mortgage payment went up. Yet, this leads to a shortage within your escrow account.

When a shortage occurs, instead of just requesting payment for the difference, the lender adjusts your monthly payment amount based on your new costs. In addition, they tack on a portion for repayment of the shortage for the previous year. It is due to this cumulative impact that a small increase in your insurance costs may result in a large increase in your monthly mortgage payment.

We also recommend that you check your Private Mortgage Insurance (PMI) status. Although PMI will normally fall off once you accumulate twenty percent equity, an error on an automatic system or changes within your loan servicing may at times result in discrepancies that will impact your total amount owed.

Can Refinancing Help?

When a homeowner considers making a higher payment toward their loan, they usually turn to refinance as an option. It becomes a good option if market interest rates are lower compared to your adjusted interest rate. You can refinance and acquire a new fixed-rate loan that will make your payments consistent without counting on adjustable rates anymore. Nonetheless, we would recommend considering costs and your plans regarding the property.

Accessing Professional Help

It would be tough for you to undertake these changes on your own. We would strongly suggest talking to a mortgage broker at BrickWood Mortgage before taking any abrupt steps. Our professionals will be able to check your escrow account statement yearly, make sure your property taxes have been assessed properly, and assist you in finding cheaper homeowner’s insurance.

Take Back Control

A surprise five hundred dollar jump might be frightening, but it isn’t usually a puzzle. Whether it’s an interest rate adjustment or a tax increase, some digging will help you find the case. By remaining proactive and examining your annual statements as soon as they land, you can prepare for these adjustments. Perhaps you’re looking at your statement and seeing an uptick. Contact us so we can discuss your options!