Reasons Why Your Monthly Mortgage Payment Might Change
If you’re used to paying the same amount for your mortgage every month and the bill changes, it might be due to an error, or there might be another explanation. These are some of the most common reasons why your mortgage payment might go up or down.
Your Adjustable Interest Rate Reset
If you have an adjustable-rate mortgage, it has an introductory period with a fixed interest rate, and then the rate begins to reset periodically. How often the rate resets will depend on the specific terms of your loan. If you have an ARM and you were paying the same amount every month, and then your payment suddenly changed, it’s most likely because your interest rate reset.
You Have to Start Repaying Principal
If you have a mortgage with an interest-only payment period, the amounts that you pay during that time only go toward interest charges. There will come a time when you’ll have to start paying off your principal balance. If you have this type of loan and your bill suddenly increased, you’ve probably reached the end of your interest-only period.
Your Homeowners Insurance Premiums Changed
Homeowners insurance companies take several factors into account when setting premiums, and rates get adjusted from time to time. If you have an escrow account, money for homeowners insurance is collected each month so your loan servicer can pay the bills when they’re due.
The amounts that are collected are based on estimates. If your insurance premiums change, your loan servicer will adjust the amount that it collects for insurance each month, which can cause your total monthly payment to change.
Your Property Taxes Were Higher or Lower Than Expected
Homeowners often have a portion of their property tax bill collected with their mortgage payment each month. That money goes into an escrow account along with money for homeowners insurance premiums, and the tax bill gets paid when it’s due. The sum collected for taxes each month is based on an estimate. If your actual tax bill is higher or lower, your loan servicer will adjust the amount it collects from you every month.
You No Longer Have to Pay for PMI
If you take out a conventional mortgage and put down less than 20%, you have to pay for private mortgage insurance. When you reach 20% equity, you can cancel PMI. If you don’t, your lender will automatically cancel it when you have 22% equity. If you have a conventional mortgage and you no longer have to pay for PMI, that can explain a sudden drop in your bill.
Review Your Loan Statement
Take a careful look at your mortgage statement and look for an explanation for the change. If you don’t see one, compare your current statement to previous ones. If you can’t figure out why your payment amount has changed, contact your loan servicer and ask for clarification. If you think there is an error, ask what you need to do to have it corrected.
