Many homeowners have fixed rate mortgages, meaning their principal and interest payment can’t change. However, that is not the only part of your mortgage payment. Your payment usually consists of your principal and interest payment, property taxes, homeowner’s insurance and maybe mortgage insurance. Once a year, your mortgage company will analyze your escrow account. This can make your mortgage payment change.
Once your mortgage company gets the bill for your property taxes and homeowners insurance, they will review the escrow account. Mortgage companies have the right to keep a cushion of two months of taxes and insurance in your escrow account. They will look at your new tax bill and insurance bill, figure out the new payment and adjust your mortgage payment based on those numbers. Typically your payment may increase and you may also have a shortage in your escrow account. Your mortgage analysis will give you options to pay the shortage in one payment or spread it out over the year.
Homeowners insurance has been increasing over the past few years due to the number of claims and rising costs in homebuilding materials. Climate emergencies on both coasts and rising costs of imported and exported materials indicate the problem isn’t going away anytime soon. You may want to talk with your insurance agent to see if there is anything you can go to lower your insurance costs, maybe changing your deductible, making sure your agent knows about any updating you have done and bundling policies.
Property taxes can change and you usually will get a notice from your county about your payment. There may be school referendums or maybe the county, city or local area has increases. Your home may have increased in value and that can cause an increase.
Other things that can affect your payment may be a temporary buydown that is expiring. If you had a temporary buydown when you closed, it will change after a year. Depending on the buydown, it may last one to three years, but usually increases after each year.
Some may have an adjustable rate mortgage and in that case your payment can adjust once or twice a year depending on the terms. Depending on how the rate changes, you can always look at refinancing your mortgage to a fixed rate, but make sure it makes sense to do that. If you plan to sell in the next couple of years, it may not make sense to refinance.
When you see your tax statement and insurance bill, you will have an idea of what will happen to your mortgage payment. If your payment changes and you aren’t sure why, you can always reach out to your loan officer. I will get calls from borrowers and can usually explain what is going on with the payment. If you do change insurance companies and get a refund from your current insurance, I would suggest making an extra payment in your escrow account. That way if they pay the new insurance, your payment will not increase too much. If you aren’t sure how to handle that, please reach out.
You should always get an escrow analysis that will tell you what is going on with your payment. If it doesn’t make sense to you, please feel free to reach out and I can help you.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
