How can Mortgage payments Change?

Jan 29th, 2008 @ 7:02 PM by MortgageMentor

Someone asked recently whether mortgage payments ever change for the better – going down instead of up. Of course my immediate reaction was: Yes, if the interest rate on your Adjustable Rate Mortgage drops.

But then I realized there could be other instances in which the monthly payment would change. For example, if your mortgage escrow account changes. An escrow account is a third-party service that collects and holds funds to help buyers accrue payments they need, like annual taxes and insurance. The advantage of having escrow is that they divide your bills and collect the funds over 12 months; that way you don’t suddenly owe a couple of thousand dollars at once. Plus, they take care of paying the bill for you. You do not have to remember to make the payment.

But mortgage taxes and insurance premiums are fluid; they can change. Insurance, for example, can go up if your property is reassessed due to earthquakes or flood plains. It also may go up if you have remodeled or upgraded your property.

Property taxes are usually adjusted by the municipality periodically—mine adjusts once every three years. However, they can change because of various filling exemptions, and they’ll change when you remodel. I was warned recently by my lender that, because I refinanced the home, I should expect a large increase in property taxes within the next year.

Tomorrow we will look at other reasons your mortgage payment could change.

One Response to “How can Mortgage payments Change?”

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