Why did your mortgage payment go up?

Your mortgage payment is not just a random number on a piece of paper. It’s a complex formula with many factors and variables. If you haven’t delved into the details of your mortgage payments, let’s take a closer look at where your money is allocated each month.

To help you determine why your monthly payment may be higher than expected, here are some common reasons why your lending organization may have increased your monthly balance:

Your taxes and insurance went up

1. Property taxes: If your property tax assessment increases, your monthly mortgage payment will increase as well.
2. Homeowners insurance premiums: If the amount you pay for homeowners insurance went up, then so will your monthly mortgage payment.
3. Homeowner’s insurance deductibles: The amount of coverage you have on any given piece of your home can increase or decrease depending on factors like where you live, what kind of improvements have been made to the property since it was purchased, and how much coverage you already had in place before purchasing this new policy.

Your escrow account might have come up short.

1. Escrow accounts are used by lenders to ensure you’re paying your property taxes and homeowner’s insurance accurately and on-time. Here’s how these accounts work: Every month, the lender takes a portion of your monthly mortgage payment and places it into an escrow account. This money is then used to pay for line items like taxes and insurance. If there’s enough left in the escrow account after all those payments are made, then that leftover amount goes back into your monthly mortgage payment and reduces what you owe overall.
2. The opposite can happen, too. If there isn’t enough money in your escrow account at any given time—for example, if some bills aren’t paid on time—your lender might ask for more funds from you to balance out the difference between what was taken out of your monthly mortgage payment versus what was actually needed for those bills. Your lender will notify you if this happens. Sometimes, it will happen because of a mistake on their end (like accidentally taking more than necessary from one month’s escrow) or because something unexpected happened with one of their vendors (like health insurance increasing).

You missed a payment.

If you’ve been a diligent mortgage payer, then the last thing you want is to be late with a payment. Missing one payment can cause your rate to go up. The good news is that there are ways to avoid missing payments—and if you have already missed one, there are actions you can take to get back on track without any serious, long-term consequences.

It’s important that you stay on top of your mortgage payments. If you do not pay them regularly and on-time, it will negatively impact your credit score. If your credit score drops too low due to missed or late payments, it could prevent you from being approved for auto loan, personal loans, or home equity lines of credit (HELOC).

Your tax assessment has increased.

If your property value has increased, your tax assessment will also increase. This can happen for a variety of reasons, including:

1. The value of homes in your area has increased overall.
2. You have renovated or added to the house, increasing its overall square footage.
3. A new development has happened in your area increasing your neighborhood’s value.

Understanding your mortgage payment.

1. Understand how your mortgage payment is calculated. Your mortgage payment is the amount of money required to fulfill the terms of the loan that granted you ownership of the property.
2. Know the components that make up your monthly payment. Principal, interest, and taxes are all part of a typical monthly mortgage responsibility. Other factors may influence your payment, as well, depending on your situation.
3. Understand what each component means and how each affects your overall balance owed on the loan (i.e., principal). For example, if you pay $100/month in taxes every month for five years, then over time, this will reduce the total amount you owe because each year’s tax bill reduces that year’s principal by up to $100 times whatever number of months it was paid in full (12).

Your mortgage payment is an important part of your finances. It’s not something you should take lightly, especially if you’re trying to get out of debt or save for retirement. Understanding why your payment may have increased can help you plan for the future and avoid any surprises.

PRMI – Great Lakes has been helping clients purchase homes since 1998 and is backed by one of the most established mortgage lenders in the county with a nationwide presence. We offer a variety of loan programs and service the greater Wooster, Ohio area – including 17 nearby counties. Are you looking for a trusted lender? Contact us by phone at 866.888.7902.