It is that time of year again… Todd, why did my payments go up on my mortgage?

By
Real Estate Agent with Keller Williams Realty


Every year, at about this time, I start to get calls from people that their mortgage payments have increased. They call yelling at me saying “Todd, you remember at the closing table both you and the escrow officer insured us that this was a fixed rate mortgage, how come are payments have risen?”

Well, there are 4 parts to your mortgage, principal, interest, taxes and insurance. The first two principal and interest are fixed and those are what you agreed to when you signed the loan, they will be fixed for the entire 30 years and will never change.

Paying your taxes with your mortgage payment

The next two however aren’t fixed and aren’t really part of the mortgage, they are just collected by your mortgage company and paid on your behalf. Insurance can go up or down and based on that, you could actually have to pay them less next year. But, the taxes, well, we all know those don’t go down, they only go one direction and that is the one that is actually causing your payments to increase.

What is happening is your mortgage company has to increase the amount they are holding in escrow for you in order to pay the taxes every year on your behalf, because if they don’t then you would get a huge tax bill every year rather than having it taken with your payments each month.

So, I hope this explains why your monthly payments went up on your 30 year fixed mortgage. If you know anyone looking to buy or sell a home in the Beaverton, Washington County area, give them our number, we are the Friendly home team and we would love to help another family home.

Posted by


Todd Clark (broker w/ Ken's Home Team)
Keller Williams Realty
Todd@IFoundYourNewHome.com
Phone: (503)524-9494
Fax: (503)746-9573

 

 

 

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 I am a licensed Realtor who specializes in Washington County, Oregon and also work in both Clackamas and Multnomah Counties including the cities of Aloha, Beaverton, Canby, Clackamas, Gladstone, Gresham, Happy Valley, Hillsboro, Milwaukie, Oregon City, Sherwood and Tigard. All information contained in these posts are copyrighted and cannot be used without prior written approval authorization from the author me Todd Clark. If you are looking for an outstanding agent please give me a call I would love to help you with all your real estate needs.

 

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Topic:
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Tags:
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Rainmaker
160,070
Colleen McConnell
Tallahassee, FL
Tallahassee Retired Realtor

So much information is distributed at closing that infrequent buyers miss a great deal of it.  I know a smart buyer who got an ARM and was surprised four years later to find out that their payment was about to adjust.

Feb 20, 2011 11:04 AM #1
Rainmaker
1,291,621
Wanda Kubat-Nerdin
Prado & Kramer Real Estate, St. George, UT 84770 - Saint George, UT
Your Preferred St. George Area Real Estate Agent.

Very simple and easily understood explanation, thanks for that Todd. This will definitely put clients minds at ease.

Feb 20, 2011 11:18 AM #2
Rainmaker
409,905
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Todd, 

So true, those pesky property taxes and homeowners insurance seem like they will only continue to rise somewhat dramatically these days.  

Good time for owners to verify if they are being creditied with homestead if you have that in your area.

All the best, Michelle

Feb 20, 2011 11:58 AM #3
Ambassador
537,424
Gerry Michaels
Glasswork Media Arts - Gettysburg, PA
GettysburgGerry Social Meida

Todd, I know I am in the minority, but, I like to pay my property separately. I don't like having it all escrowed, however if you are buying a home and cannot master saving for your property taxes, maybe you aren't ready to buy that house. That is just my opinion and I know I am in the vast minority, but that is my opinion. As my friend Liz says, that and $10 will get you into the movies.

Feb 20, 2011 12:17 PM #4
Rainmaker
238,110
Angelia Garcia
Pure Realtors - Dallas, TX

Hey Todd,

I agreed with your post up until the taxes ONLY go up.  Nope, mine went down last year.  But then so did our value.  HA!

Feb 20, 2011 12:18 PM #5
Rainmaker
539,355
Rob D. Shepherd
Coldwell Banker Coast - Florence, OR
Principal Broker ABR, GRI

I get the same calls, they either didn't undertand, forgot or didn't pay attention when the loan officer and the escrow agent mentioned it.

Feb 20, 2011 12:19 PM #6
Rainmaker
733,405
Juli Vosmik
Dominion Real Estate Partners, LLC, Scottsdale, AZ - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Todd, I'm surprised that clients aren't aware of this. And, it seems that the mortgage companies way over escrow when there's a tax increase - but that's because they have to play "catch up" - paying the short fall of last year's taxes then preparing for next year.  Most do a really good job of explaining it in their notifications.  If not, their customer service departments are there to explain it. 

Last year, my son got a "refund" from overpayment of escrow fees.  I told him to put it into a seperate savings account because he'll need it this year - DON'T SPEND IT.  Well, sure enough, he just got his new statement and he owes a lump sum or can have significantly higher monthly payments.  He called to thank me, LOL. 

Feb 20, 2011 01:15 PM #7
Rainmaker
857,804
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

I like that the banks are now required to refund overages in their escrow accounts. For 3 years I had a Countrywide loan that collected about $100 too much every month. Every year I had to go through a ton of red tape to get the refund.

I think the fact that people don't realize that taxes and insurance affect their payment is a sign of why so many got into ARMs and weren't prepared when they re-set. They just didn't pay attention. They heard what they wanted to hear (low payment) and the rest went in one ear and out the other.

Feb 20, 2011 05:01 PM #8
Rainer
210,774
Joe Kenny
Realty Executive Midwest - Darien, IL
Better Than Your Average Joe

Good info today Todd.  The taxes here go up despite the value depreciation.  The tax levy's have to remain at 33%.  It's tricky when you the budgets are for the future and the property taxes are in arrears.

Feb 20, 2011 06:48 PM #9
Rainer
276,890
Kathryn Maguire
GreatNorfolkHomes.com (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

I have had those calls before...now I tell them that before closing. But right now, I think that most people should be checking to make sure that the lender is not putting too much in escrow for taxes.  A lot of areas are seeing decreases due to decreased assessed values.

Feb 21, 2011 08:30 AM #10
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Todd Clark
Keller Williams Realty - Beaverton, OR
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494

Property values seem to go down, yet somehow here the taxes still manage to go up each and every year... How strange is that.

Feb 21, 2011 06:35 PM #11
Rainmaker
589,989
Jim Hale
ACTIONAGENTS.NET - Eugene, OR
On the Move for You! - Eugene - Springfield Oregon Real Estate

In Oregon, it is not strange that taxes are going up while values are going down.

Oregon property taxes are not based on real market value.  Assessors annually estimate real market value but they do not base taxes on that number.

They base taxes on "assessed values".  Assessed values can only go up by 3% each year as limited by the amendment to the state constitution passed by voters in 1990.

Despite the boom, today's bust prices are still above those steadily, but slowly increasing assessed values.

Feb 23, 2011 04:57 AM #12
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