One reason mortgage payments can be altered, even though you might carry a fixed-rate mortgage, is that it’s legal for lenders to raise the monthly payment if they determine that there is a deficit in the escrow account.

So, imagine that you remodeled your home last year. Because you had to apply for a permit, a red flag went up in the county offices; subsequently, your property was reassessed and taxes were raised. The lender in turn raised your monthly payment because they didn’t have enough in escrow to cover next year’s higher taxes. In the second month of the year, you appeal the tax hike, and you win. However, the escrow amount is locked in for the year. Even though you should not have to pay the higher rate, the escrow account will lag behind; you will get a refund at the end of the year, along with the adjustment to reflect the change.

ARMs and Hybrid ARMS are mortgages that have monthly payment amounts that will change over time. It is important to always be aware of the change, and make sure you will not have trouble making the higher payment. A hybrid ARM might be called a 5/1 or 3/1 ARM. The first number tells you how many years the loan will have a fixed rate, and the second number tells you how often the rate changes.