It isn’t an uncommon scenario. You receive your monthly mortgage statement, open the envelope and the amount to be paid is different for some reason. And as you look at the amount incredulously, you can’t figure out what caused the change.
No worries. It happens. We lead busy lives so it is easy to lose sight of these kinds of things. Here is a list of the most likely reasons your payment has changed or gone up.
You have an adjustable rate mortgage (ARM)
This is, perhaps, the most likely reason your mortgage payment has gone up. An ARM usually starts out with a lower payment than a fixed-rate mortgage. And after a certain period, the rate and monthly payment rate can increase. Be sure to check your loan documents. All the details that explain your opening rate and when that rate changes should be spelled out entirely.
Your mortgage lender made a mistake
Yes, it can happen. If you have gone through all of your documents and you are convinced your lender made a mistake somehow, contact the company right away. Be sure to explain the situation and keep a record of the conversation. If it was a mistake on your lender’s part, be sure to ask for a corrected statement. If your lender doesn’t believe it has made a mistake in calculating your payment, consider sending a notice of error to your lender explaining why you believe the lender made a mistake in determining your payment.
You have an escrow account that takes in payments for insurance and property taxes
This is also another common reason for mortgage payments to go up. Escrow accounts can include a combination of insurance (homeowners, private mortgage, and flood) and property taxes in addition to paying down the principle of the loan. If insurance premiums or taxes go up, that could account for any changes in overall payment. Be sure to read your monthly statement carefully.
Your escrow payment or interest rate may have decreased
Once a borrower has reached 20 percent equity in their home, they may be able to cancel their private mortgage insurance. If you are able to cancel that insurance, you will soon see a decrease in your monthly payment.
You have an interest-only payment option
Some loans start out for a period of time in which borrowers pay interest only. Once that introductory period expires, you can see your payments jump because you begin to pay interest and your principal.
Be sure to read all the fine print in your mortgage documents. More often than not you will find the answers there. If for some reason you don’t, or if there is something you don’t understand, contact your lender.
Escrow is something that can benefit the homeowner, home buyer, and seller as well. However, it doesn’t always apply to every situation.
Better Lending has a couple of tricks and tips to make the purchasing process a little easier for first time home buyers.
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