Why your mortgage payment went up — and what you can do about it (2024)

FAQs

Why your mortgage payment went up — and what you can do about it? ›

Changes in the price of your property taxes or homeowners insurance are among the most common causes of a mortgage payment increase. These funds are traditionally held in an escrow account connected with your mortgage payment.

If your home value has risen since the prior year, the cost of your taxes and insurance will also increase. Thus, the entity that holds your mortgage will hike up your escrow to ensure your monthly payment can cover those higher bills.

The Bottom Line On Lowering Your Mortgage Payment

You may be able to lower your mortgage payment by refinancing to a lower interest rate, eliminating your mortgage insurance, lengthening your loan term, shopping around for a better homeowners insurance rate or appealing your property taxes.

Is this legal? Yes. If your bank determines that there will not be sufficient funds in your mortgage escrow account, it may raise your payment by the amount of the shortage. The bank may offer you the choice to repay the amount in one lump sum or spread the payments over a 12-month period.

Refinance or modify your mortgage. If you can refinance your mortgage to a lower interest rate, then you can lower your overall mortgage payment — potentially offsetting a larger escrow account balance requirement. You can also use refinancing or modification as a means of extending your loan term.

As time goes by and your loan balance decreases, you'll owe less interest every month. So most of your payment will then go toward the principal, even though your total payment stays the same. All that said, your mortgage payments may change slightly because of alterations in your insurance or tax rates.

Why did my mortgage payment increase? Mortgage payments can fluctuate because of changes in the economy like interest rates rising, but can also change for other reasons, such as if your property tax or homeowners insurance premiums increase.

Mortgage servicers conduct an escrow analysis annually to ensure that enough funds are collected to cover property taxes and homeowners insurance. If the new tax assessment is higher than initially estimated, the mortgage payment will increase to compensate for the shortfall in the escrow account.

You'll have to file an appeal with your county assessor. This office will then review your property taxes to determine if you are paying too much. A successful appeal could result in a lower property tax bill and, if you are paying into an escrow account each month, a lower monthly payment to your lender.

Why did my mortgage go up $300 dollars? ›

It's common to see monthly mortgage payments fluctuate throughout the life of your loan due to changes in your home value, taxes or insurance.

Why did my escrow go up? Two main factors can cause an escrow shortage—and ultimately increase your mortgage payments: Your property taxes increased from the previous year. Your homeowner's insurance premiums rose from the last year.

An increase in your escrow payments could be due to tax and insurance rate fluctuations. Other events might increase your payments as well. For example, the value of your home may increase, pushing up your property tax bill.

You can try to lower your property tax bill to reduce the escrow payment that typically makes up much of your monthly mortgage payment. Tax assessments are sometimes too high following real estate market corrections or local rezonings, for instance.

You can fix the escrow shortage by paying the entire shortage amount in one lump sum, spreading it out in payments over a year or doing a mix of both.

The average mortgage payment is $2,883 on 30-year fixed mortgage, and $3,759 on a 15-year fixed mortgage. But the median payment is likely a more accurate measure for many: $1,775 in 2022, according to the US Census Bureau.

Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan this week crossed the 7% threshold for the first time this year, jumping from 6.88% to 7.1%. While that is down from a peak of 7.79% in the fall, it remains sharply higher than the pandemic-era lows of just 3%.