Can my monthly mortgage payments change?
Yes. There are a few reasons a mortgage payment can increase (or decrease).
Mortgage Product
If you chose to do an ARM (Adjustable rate mortgage) the rate is only fixed for the set term such as 5, 7 or 10 years and after that period the rate will adjust based on the index and margin. The margin is a set number when you lock in the rate and the index is tied to some trackable financial benchmark such as the 1 year LIBOR rate. On a regular fixed rate loan – like a 30 year fixed - the mortgage payment itself should not ever change.
City Taxes
The taxes are usually part of your monthly payment and they can increase annually depending on the city or town. When the taxes go up – the bank does an annual escrow review and look to adjust the monthly amount based on the new expenses. They will request a one-time payment to cover the difference or offer to increase your monthly payment to make up the now deficit. You will get a letter in the mail explaining the reason for the deficit and the option to send in a one time payment or a monthly payment increase.
Home Insurance
Similar to the taxes the home insurance can increase (or decrease) after the first year and the bank will need to adjust the monthly payments to account for the change. You are always able to switch home insurance companies if you are unhappy with the adjustments – you just need to let the bank know who the new company is and send a copy of the new premium so they know what to charge monthly.
Chris Butts
VP Sales Manager
NMLS# 613440
Chris Butts is a Loan Originator and Sales Manager at Leader Bank. He has been in the mortgage industry for over 15 years and is committed to providing his customers with the highest quality service. His extensive experience and knowledge allow him to effectively and consistently help his customers during the loan process, whether it’s a first time home buyer, a refinance or purchasing a dream home.
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