It’s likely that your mortgage payments are an influential factor when it comes to family budgeting and spending. In the event that your payment changes, here are a few things you should know about your mortgage and why there could be changes to your payment.
1. You have an Adjustable Rate Mortgage (ARM).
With a fixed rate loan, your interest rate is set from the beginning. This means that your interest rate won’t ever change, so you’ll know exactly how much you’ll be paying in principal and interest each month until your loan is paid off. If you have an adjustable rate mortgage (ARM), your interest rate and monthly payment could change over the life of your loan.
The benefit of an ARM loan is that the initial interest rate is typically lower than that of a fixed rate loan. But you’ll want to keep in mind that your monthly mortgage payment could fluctuate according to the terms of the note you sign.
2. Your property taxes increase or decrease.
Property tax assessments are conducted periodically by your local government. If you’re wondering what those tax dollars are used for, think about public schools, libraries, parks, sanitation, police, fire protection, etc. Property tax percentages and laws are set at the local level and can vary depending on where you live. When your property taxes increase or decrease, you’ll see a change in your escrow payment. Escrow is money that your mortgage servicer sets aside to pay property taxes and insurance premiums. Keep reading for more information on escrow.
3. Your homeowner’s insurance changes.
Let’s talk about homeowner’s insurance. Most mortgage lenders require homeowners insurance, and that’s a good thing. These policies usually cover the home and its contents from damage and theft. It may also come in handy if someone is injured in the home or on the property, because it could protect the owner from personal liability. Insurance premiums can be adjusted on an annual basis, and any change to that cost will impact your monthly mortgage payment. Just like the money set aside to pay your property taxes, your mortgage servicer may set aside funds in an escrow account to cover your homeowners insurance, too. The money put into escrow is part of your monthly mortgage payment, and if your taxes or insurance payments change, your mortgage payment will change too.
If you’re a Mr. Cooper customer and you have additional questions about your payment or want to learn more about why your mortgage payment changed, give us a call.