Why Would My Mortgage Payment Go Up?
Do you have questions about why your mortgage payment has increased? Thankfully, there are answers to this quandary. As it turns out, there are several different factors that could cause your home loan rates to change. If you’re asking, why would my mortgage payment go up, read on to find some possible answers. Knowing why can help you decide how to best manage the change.
Why Would My Mortgage Payment Go Up? Start With Mortgage Type
First, the increase could be because of the type of mortgage you have. If you’re not sure what that is, double-check. You can contact your lender and ask. Or, if you still have the paperwork from when you closed on the home loan, the mortgage type should be listed there. It could also be included in any disclosures you received.
Typically, you will have either a fixed-rate or adjustable-rate mortgage. If your mortgage is going up, it’s very likely yours is adjustable.
Why Would My Adjustable-Rate Mortgage Payment Go Up?
Unlike a fixed-rate mortgage, with an adjustable-rate mortgage (also known as ARM) the interest rate can fluctuate. When your mortgage rate goes up, it means your monthly payment increases as well.
Often, ARMs begin with a few years of a fixed interest rate. Once you get past the fixed-rate period, the interest rate adjusts either every six months or every year in accordance with a recognized financial index. The length of time your ARM has a fixed rate and the time it will continue to adjust afterward is set in place when you first get the loan.
The shift between these periods may be why some borrowers mistakenly believe they have fixed-rate mortgages when they actually have ARMs. And since ARMs can start out with especially low interest rates, this could make the change even more jarring, especially if the economy has changed substantially in that time.
Payment Increase With Interest-Only Mortgage
Another mortgage option may allow you to initially only pay the interest on your loan. This is usually for a short, predetermined length of time. Depending on the lender, it could be up to 10 years. Of course, once this period ends, you will need to start paying the principal as well as the interest. This can lead to a significant increase in your monthly mortgage payment.
Mortgage Payments Could Go Up If Your Lender Is Charging New or Higher Fees
Whether your mortgage rate is fixed or adjustable, it’s possible that your mortgage payment went up because your lender started charging new or higher fees. You can look at past and present mortgage statements to see if there are any new items included. Check mail, email, and online account correspondence from your lender to see if you received any notification from your lender of new or increased fees ahead of the latest bill.
One example of a new fee is in the case of a late payment. To avoid these in the future, make sure to make your monthly mortgage payments on time and in full. If this is your first instance of not paying on time, you can contact your lender. They may agree to waive the late fee. However, this isn’t a guaranteed outcome.
Homeowner’s Insurance and Property Taxes Could Impact Mortgage Payments
It’s likely that your mortgage is in escrow. This means your payment could go up when homeowner’s insurance or property taxes increase. This is the case whether you have a fixed-rate or adjustable-rate mortgage. Usually, escrow is specified in your monthly statements.
Depending on where you live, property taxes are usually reassessed every one or two years. This could lead to changes that, in turn, drive up your monthly mortgage payments.
Private Mortgage Insurance Premium Increase
If you have private mortgage insurance, or PMI, your insurance rates could have gone up, causing an increase in your monthly payments. Did you recently end your private mortgage insurance? Because that could also lead to a change in your monthly payment.
If It’s None of The Above, Why Else Would My Mortgage Payment Go Up?
While this is rare, it is possible that a mistake was made. If you believe this might be the case, you should get in touch with your lender.
You can do so by calling or by sending a letter. If you decide to send a letter, make sure to include:
- Your name and home address
- Your mortgage account number
- An explanation of why you believe there’s been an error
- Whichever information you’re requesting from your lender
If it was a mistake on their part, the lender will respond by sending you a corrected statement.
Now That I Know Why My Mortgage Payment Would Go Up, What Can I Do About It?
If you’re dealing with an ARM, it may be possible to change your mortgage type. A convertible ARM can be converted to a fixed rate. If your ARM isn’t convertible or you have an interest-only loan but you still want to change to a fixed-rate mortgage, you can apply for a home loan refinance. Generally, to qualify for a refinance, you have to be in good financial standing. This means a good credit score and debt-to-income ratio. It will also help if you’ve been making regular, on-time payments toward your current mortgage balance.
Refinancing can help with other payment increase issues as well. It can be a way to remove PMI if you’ve met the home equity requirements. You can also use it to switch to a lender with lower fees, secure a lower interest rate, or change the term of your loan to lower your monthly payment.
Finally, before you renew your homeowner’s insurance, you can look for better rates. Shop around and get some quotes from different insurance companies. Maybe you can bundle your homeowner’s insurance with your auto insurance and save money that way.
Because mortgage payments can change for numerous reasons, it’s important that you make sure you’re ready to open one. Thankfully, there are some great home loan options out there, and when you find the right lender, you’ll know they’re on your side every step of the way. If you don’t have a mortgage yet or want to refinance to better manage your mortgage payment, start searching today. If you’re in the Pacific Northwest area, check out Solarity Credit Union’s home loan options.