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

The benefit of a fixed-rate mortgage is that your interest rate stays consistent. But your monthly mortgage bill can still change — in fact, it generally fluctuates at least a little bit every year. Rising home values and insurance premiums have caused unusually dramatic increases for some homeowners in recent years. Here’s why and what you may be able to do about it if your payment has increased significantly.

Mortgage payments change because of escrow — what is that?

Your mortgage payment gets broken down into multiple parts: There’s the money you pay into your principal, which pays off the debt you owe your lender and builds equity; there’s the interest; and there’s your escrow payment, the account used to cover your property taxes and your home insurance.

The part of your fixed-rate mortgage payment that changes annually is your escrow. Each year, the financial institution that holds your mortgage estimates how much you’ll pay in property taxes and home insurance. 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. (You’ll get a refund check if the estimate ends up being too high and there’s money left over in your escrow account after a year.)

The very thing that homeowners usually want — an increase in their home’s value — is most likely the culprit, though other factors may have contributed.

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“Generally, home values have been going up across the country,” says Rob Cook, vice president of marketing at Discover Home Loans. “That does ultimately impact the tax liability that borrowers have.”

An increase in home values doesn’t just impact the taxes you owe, says Joann Thomas-Vason, the mortgage lending manager at First Florida Credit Union. It also affects your insurance premiums.

Home insurance premiums nationwide rose by nearly 9 percent in the first eight months of 2023, according to financial analytics company S&P Global, and 15 states saw monthly insurance payments increase by a double-digit percentage.

According to a study from Policygenius, an online insurance marketplace, insurance costs have also escalated because of extreme weather. U.S. insurers paid out $99 billion in claims because of natural disasters in 2022; they appear to recoup those losses by charging higher premiums, the study says. It also cites inflation and supply-chain issues as reasons for higher premiums.

Can I protest the increase?

Your local tax authority will send you information well in advance of any changes in the taxes you’ll have to pay and will notify you about how they’re determining your home value. (You should expect an increase in home value if you do a renovation or make other significant improvements to your home.)

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“Homeowners should not discard that — that’s something you should look at and understand, ‘Okay, well, if my tax burden is going to go up, at some point my escrow requirements are going to go up,’” Cook says.

If you disagree with the valuation of your home, each jurisdiction will have a process for you to appeal the estimate.

Thomas-Vason suggests speaking to your home insurance provider as well “to see if there’s any way possible to lower that premium,” and shopping around to ensure that you’re getting a good deal.

If you won’t be able to pay the increased monthly cost, she recommends talking to your servicer, which is the financial institution that holds your loan. “Most loan servicers would help,” Thomas-Vason says. Typically, they’ll “spread the increase in the escrow over a longer period of time,” lowering the amount you owe each month.

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.

Why did my mortgage payment go up so much? ›

The part of your fixed-rate mortgage payment that changes annually is your escrow. Each year, the financial institution that holds your mortgage estimates how much you'll pay in property taxes and home insurance. If your home value has risen since the prior year, the cost of your taxes and insurance will also increase.

How can I stop my mortgage payment from increasing? ›

Refinance With A Lower Interest Rate

If you're looking to lower your mortgage payment, keep an eye on the market. Look for rates that are lower than your current interest rate. When mortgage rates drop, contact your lender to lock your rate. Another way to get a lower rate is to buy down your rate with points.

Can I decrease my mortgage payment after increasing it? ›

Normally, once you increase your payments, you can't lower them until the end of the term. The term is the time that your mortgage contract is in effect including your interest rate and other conditions. The term can range from a few months to 5 years or longer.

How do you fight escrow increase? ›

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.

Why did my mortgage go up $200 a month? ›

Your servicer may have charged you fees that increased your monthly payment. Check your monthly mortgage statement or any correspondence you recently received from your lender or servicer. It's also possible that your mortgage servicer simply made a mistake.

Can your mortgage go up because of escrow? ›

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.

Is it legal for your mortgage to increase? ›

Yes, your monthly mortgage payments can go up. For example, if you have an adjustable-rate mortgage, your mortgage payments can go up with each adjustment period (typically annually). If you have a fixed-rate mortgage, you may still see an increase in your monthly mortgage payments due to several common factors.

Can I ask my mortgage company to lower my payments? ›

Ask your lender for a loan modification

Each lender offers its own loan modification program, which could include options such as temporary forbearance or permanently reducing your monthly payment by extending your loan term length or lowering your interest rate.

Why did my mortgage go up $300 dollars? ›

A higher monthly mortgage payment doesn't necessarily mean you've done anything wrong. Mortgage payments can change even when the homeowner pays on time. Changes in your escrow account, property taxes, homeowners insurance or interest rate can increase the dollar amount of your mortgage loan payment.

How to pay off a 30 year mortgage in 10 years? ›

Here are some ways you can pay off your mortgage faster:
  1. Refinance your mortgage. ...
  2. Make extra mortgage payments. ...
  3. Make one extra mortgage payment each year. ...
  4. Round up your mortgage payments. ...
  5. Try the dollar-a-month plan. ...
  6. Use unexpected income. ...
  7. Benefits of paying mortgage off early.

Why is my mortgage not going down? ›

The most common reason is because you have an 'interest only' mortgage which means that you are only paying off the interest on the loan. In these cases, repayment of the capital at the end of the mortgage term is your responsibility e.g. through an endowment policy or alternative investment plan.

How can I lower my escrow payment? ›

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 escrow payment go up so much? ›

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. Or, your insurance bill may increase if you remodel and add an extra bedroom to your home.

Why did my escrow go up $100? ›

The most common reason for a significant increase in a required payment into an escrow account is due to property taxes increasing or a miscalculation when you first got your mortgage. Property taxes go up (rarely down, but sometimes) and as property taxes go up, so will your required payment into your escrow account.

What is the average mortgage payment increase? ›

The Consumer Financial Protection Bureau says the average payment for a home purchase loan surged more than 46%—from $1,400 per month to $2,045—over the 12 months ending December 2022. Likewise, the median total of costs and fees for such mortgages spiked almost 22% to nearly $6,000 in the same period.

Why does my mortgage keep going up because of escrow shortage? ›

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.

What is the average monthly mortgage payment? ›

5 States with Highest Average Mortgage Payment
StateAverage Monthly Payment
California$3,330
Hawaii$3,222
District of Columbia$2,955
Idaho$2,527
1 more row
Dec 20, 2023

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