Is your monthly mortgage payment suddenly higher than it used to be, and you’re not sure why? You’re not alone. Whether due to financial changes within the real estate market or personal circumstances, homeowners often struggle to understand why their mortgage payments are increasing.

We'll talk through the common reasons a mortgage might go up so that you can better understand what's happening with your wallet and how you might fix it.

Why did my Mortgage Payment Increase?

Interest rates changed

One of the most common reasons for an increased payment on a mortgage is that interest rates have increased since you first took out your loan. This means that the percentage you’re paying for borrowing money has increased, so your monthly payments may increase to accommodate this change.

Property taxes went up

If property taxes in your area have increased since you bought your home, it could explain why your mortgage payment has also increased. Your lender will typically add the cost of taxes into your monthly payment amount so they can pay them on time throughout the year.

Property insurance increased

Much like with property taxes, if the cost of your insurance has gone up, it could increase your mortgage payment. Again, the lender wants to ensure that any required payments are made on time and in full each month.

Refinancing

If you have recently refinanced your loan, chances are you’re now paying a different interest rate than you were previously. This could cause your monthly payment amount to increase as well, depending on the new terms of the loan.

Escrow changes

Your lender may also be collecting more money for escrow (i.e., taxes or insurance) than they usually do if either of these payments went up since you first took out your loan. That extra money will then be added to your monthly payment, resulting in a higher overall amount.

Adjustable rate mortgage (ARM)

If you have an adjustable-rate mortgage, then it’s normal to see your monthly payment increase when interest rates go up. You may be able to keep the payments lower for a while if the lender allows you to reset the loan or switch to a fixed-rate loan.

Late Fees

Finally, another common reason why a homeowner’s mortgage payment might be higher than usual is due to late fees. If you are behind on your payments and haven’t caught up, additional late fees will be added to your next bill.

These are the most common reasons that your mortgage payment might have increased. You should contact your lender for more information if you still need to determine why yours has increased. They'll be able to provide specific details about why your payment has increased and what steps you can take to resolve it if necessary.

Service Member Benefits

Some special benefits can help offset any increased mortgage payments if you are a current or former military member. These benefits include loan forbearance (which temporarily suspends your mortgage payments) and income-based repayment plans for those who have difficulty making their full monthly payment due to financial hardship. Additionally, there are VA loans available that offer lower interest rates than conventional mortgages.

You should contact your lender as soon as possible if you need help paying your higher mortgage so they can work with you on these options. It’s important to stay on top of any changes in your finances and reach out for assistance if needed.

Prepare for Increased Mortgage Payments

It’s never too early to start thinking ahead and preparing for any potential increases in your mortgage payments. Here are some tips you can use to help reduce the impact of an increased payment:

Create a budget

Creating a budget is a great way to ensure you have money available when unexpected expenses arise, like higher mortgage payments. Doing so will also give you an idea of how much extra money you have each month to put aside for future payments.

Save regularly

Save enough monthly money if your mortgage payment increases or other unexpected costs arise. This will allow you to make those payments without issues and help build your emergency savings fund.

Review your loan documents

Reviewing your loan documents regularly is important to understand what could cause your payments to change. This includes interest rates, escrow payments, and other fees affecting your monthly payment amount.

Stay in touch with your lender

Your lender should be informed of any changes to your finances or other circumstances that might influence your monthly pay. They may have options to help reduce the impact of a higher mortgage payment on your budget.

Plan for the future

Finally, make sure you plan for any potential increases in mortgage payments down the road. Consider refinancing or switching to a fixed-rate loan, as this could help reduce your payments in the long run.

Decrease your loan amount

Another way to help reduce the impact of a higher mortgage payment is to decrease your loan amount. You can do this by making extra payments or refinancing your loan for a lower interest rate and shorter term. This will help you save money in the long run and ensure your monthly payment stays manageable.

Tax exemptions

You may be eligible for some tax exemptions regarding your mortgage payments. Depending on where you live, there may be certain state or federal deductions that can help reduce the amount of taxes you owe each year.

It’s important to check with a local tax professional to see what specific deductions you can take advantage of. Certain benefits may apply when filing taxes if you are an active-duty military member.

Property Taxes and Property Reassessment

One of the reasons your mortgage payment could have increased is a change in your property taxes. If the cost of your property taxes has increased, your mortgage payment will also increase to cover this new expense. In some cases, if you live in an area that undergoes periodic reassessment, then it’s possible that the assessed value of your home has gone up and changed your property taxes as well. This can cause an increase in what you owe each month for both principal and interest.

Homeowners Insurance

If you’ve recently changed homeowners insurance providers or added more coverage, then this may be causing your mortgage payment to go up. When the amount of your homeowner's insurance goes up, so does the overall cost of your loan. Your lender may also require you to have a certain amount of coverage to keep them protected against any potential loss.

FAQS

How do I stop my mortgage from increasing?

The best way to stop your mortgage from increasing is to review your loan documents and stay in touch with your lender. You should also create a budget and save regularly to keep up with unexpected expenses like higher payments. Look into tax exemptions or other benefits that may apply to you if needed.

Will my mortgage payment go down?

Your mortgage payment may decrease if you decrease your loan amount, switch to a fixed-rate loan, or refinance for a lower interest rate and shorter term. Certain benefits may be available for service members that help reduce the impacts of higher payments.

Do mortgages go up every year?

Mortgages may go up every year depending on the terms of your loan and changes to the assessed value of your home. You should review your loan documents regularly to understand any potential payment increases.

Conclusion

Knowing the factors and possibilities behind why your mortgage rate went up is key to ensuring you’re getting the best deal possible. Examine your circumstances closely, contact knowledgeable mortgage professionals, crunch the numbers, and compare loan estimates before signing the dotted line. With rates changing often, call your lender if a new deal better suits your needs. No matter what, understanding why did my mortgage go up can help you save money in the long run.