Why Your Fixed-Rate Mortgage Payment Went Up
Justin Reynolds
Key Takeaways
- Fixed-rate mortgage payment increases can result from escrow shortages, property tax reassessments, homeowners insurance premium increases, and Private Mortgage Insurance changes.
- Homeowners should review their escrow statements, shop for insurance, appeal assessments, or ask about lump-sum shortage payments to manage increased payments.
- Understanding the reasons behind your mortgage payment increase is crucial to making informed decisions about managing your finances.
If you've recently noticed an increase in your fixed-rate mortgage payment, don't panic! There are several reasons for this change that we will help explain. Below is a breakdown of principal and interest payments as well as taxes, insurance, escrow shortages, Private Mortgage Insurance (PMI), and next steps.
Principal and Interest
Your fixed-rate mortgage payment consists of principal (the amount borrowed) and interest (what you pay for the loan's use). An increase in your monthly payment may be due to an increase in either or both of these components.
PMI Removal Break-Even Calculator
Educational estimate only -- automatic PMI cancellation at 78% LTV per the Homeowners Protection Act usually costs nothing and doesn't require a refinance. This calculator is for the refinance path.
- Break-even on closing costs
- 31 months
- Remaining term: current vs. new
- 26 yrs vs. 30 yrs
- Added interest from resetting the term to 30 years
- $42,382
You'd break even on closing costs in about 31 months, but resetting to a 30-year term adds roughly $42,382 in total interest over the life of the loan compared to finishing your current 26-year payoff. Weigh the monthly PMI savings against that added long-run cost.
Property Taxes
Property taxes are local levies on real estate to support public services. If your property tax bill has risen, it could be due to changes in your assessed value, tax rates, or special assessments. Check with your county or city government for specific details.
| Property Taxes | Homeowners Insurance | |
|---|---|---|
| Who sets it | Your local county/municipality | Your insurance provider |
| Why it can rise | Reassessment, millage rate changes | Premium increases, claims history, rebuild cost inflation |
| Can you dispute it? | Yes -- appeal your assessment | Yes -- shop other providers |
| Paid through escrow? | Usually yes | Usually yes |
Homeowners Insurance
Homeowners insurance protects your property from damage caused by natural disasters, theft, and other perils. Rising premiums could be due to increased claims in your area, updates to coverage requirements, or changes in the insurer's underwriting practices. Shop around for better rates if needed.
Escrow Shortages
A common cause of increased mortgage payments is an escrow shortage. In some cases, your lender may require you to make a lump-sum payment to cover any shortfall.
Talk to your lender about your escrow shortage options
Private Mortgage Insurance (PMI)
PMI is required when you put less than 20% down on a home purchase. If your monthly payment has gone up and you have PMI, it could be due to an increase in the premium or changes in the insurance company's policy. Check with your lender for more information.
What You Can Do
- Check your escrow statement
- Shop homeowners insurance
- Appeal your assessment
- Ask about a lump-sum shortage payment
Legal Compliance Notice
Your lender is required by law to provide certain disclosures regarding your mortgage payment. Review your loan documents for more information.
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