Ways Your Mortgage Payment Could Increase

One of the great benefits of owning your home is that you do not have to deal with escalating rental rates. Over time, your mortgage payment could be substantially lower than market rents in your area. However, this is not always the case. Mortgage payments can increase in some situations. What circumstances could cause your loan payment to increase?

An Interest Rate Adjustment
Did you take out an adjustable-rate mortgage? After an initial period where your starting interest rate holds steady, the rate will adjust. If the rate decreases, the mortgage payment will decrease. If the rate increases, however, your mortgage payment will increase. There are usually upper and lower caps so that your mortgage payment cannot fluctuate dramatically.

The Interest-Only Period Ends
If you took out an interest-only loan, your mortgage payment has entirely consisted of interest charges. However, when the interest-only period ends, your payment will include principal and interest charges. This creates a higher mortgage payment that will remain in place throughout the life of the loan.

Property Taxes and Insurance Increase
You may think that your mortgage payment would not change if you opted for a fixed-rate loan. The typical mortgage payment includes allocations for principal and interest. It also includes escrow payments for taxes and insurance. While the principal and interest portion of your mortgage payment will not change, your home’s taxes and insurance likely will change over time regardless of the type of mortgage that is in place. Keep in mind that this could cause your payment to increase year after year throughout the life of your loan.

Do you want to learn more about your home loan options? Our lending reps at MortgageDepot are happy to answer your questions and can help you explore your options. Contact us by phone or email today for assistance with your home lending needs.

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