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Why Did My Mortgage Payment Increase?

My monthly mortgage payment including taxes and insurance increased significantly and I do not know why. Can you explain the reasons why your mortgage payment can increase?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Possible reasons your monthly mortgage payment increased include the following:  

If you have a fixed rate mortgage the only reason your monthly payment can increase is if you have an escrow or impound account and your property tax or homeowners insurance increase or if you have a deficiency in your escrow account

If you have an adjustable rate mortgage (ARM) or interest only mortgage and your mortgage rate increases

If you have a negatively amortizing mortgage and your mortgage balance increases. If you obtained your mortgage within the past eight years then it is unlikely that you have a negatively amortizing mortgage because those loan programs are no longer available.

If your monthly payment increased because your property taxes and homeowners insurance increased, you can try to find less expensive insurance or potentially submit an appeal to reduce your property tax assessment.  There is no guarantee that your county property tax assessor will grant your appeal but it does not hurt to try.  

Another potential reason for your payment to increase is if you have an escrow account deficiency.  In short, an escrow account deficiency occurs when there is a shortfall in the account, usually because the lender has not received an updated property tax or homeowners insurance bill and has not been charging you the correct amount for those items for several months.

If your escrow account is deficient, your required monthly payment may be increased temporarily to address the deficiency. Your current mortgage statement should outline the components of your monthly payment including principal, interest, property tax, homeowners insurance and any escrow account deficiency. If you have an escrow account deficiency your increase in monthly payment should only be short term and you can confirm this point with your lender. 

I recommend that you contact your lender and request an escrow account history for the past several years. An escrow account history enables you to review an itemized breakdown of any payments made into the account and any distributions out of the account to pay for property tax, homeowners insurance and other applicable fees. The escrow account history enables you identify changes in your mortgage payment (including principal and interest), property tax, homeowners insurance and any other applicable charges that contributed to the increase in your monthly payment.

You can also use the escrow account history to compare property tax and homeowners insurance payments made from the account to the actual bills you received for those items and to identify any account deficiencies.

If you have an adjustable rate mortgage (ARM) or interest only mortgage that means that your monthly mortgage payment may increase when your loan adjusts.  If you have an ARM or interest only mortgage and interest rates increases, your monthly payment typically increases as well.  Additionally, if you have an interest only mortgage, your payment can jump when you are required to start paying principal.  You can determine what type of loan you have and understand your loan terms by reviewing your mortgage note.

If you have an ARM or an interest only mortgage you may want to consider refinancing into a fixed rate mortgage. The mortgage rate and monthly payments for a fixed rate mortgage do not change or increase over the life of your mortgage. You can use our mortgage refinance calculator to determine if you can save money by refinancing.

If you cannot understand the monthly payment increase after reviewing the information above and examining your current mortgage statement and escrow account history then I recommend that you contact your state attorney general or the Consumer Finance Protection Bureau (CFPB) to review your situation more closely.

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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