When you bought your home with a fixed-rate mortgage, you probably budgeted your monthly expenses, thinking your house payment will remain the same. But all of a sudden, your monthly mortgage payment goes up. Why? credit.com gives four possible reasons:
1. Your home’s value went up
Little by little, the housing market is recovering. That means your house maybe worth more. If you plan to sell, that’s good news. But it’s bad news if you’re planning to stay in your house. Adding a room, remodeling a kitchen, or anything else requiring a building permit, will add value to your home, as well. Your tax assessor will, most likely, take note of your home’s increased value and raise your property taxes. Or if you pay through an escrow account, one-twelfth of the bill will be tacked onto each mortgage payment.
2. Your home insurance premium rose
Maintaining a good credit score is important to keep the cost of insuring your home from going up. While you may pay more for insurance as the result of your home value going up, you could also pay more due to a falling credit score. credit.com says a drop from “excellent” to “poor” can more than double home insurance rates in 39 states. If you pay your home insurance through an escrow account, the higher premium will be reflected in a higher house payment.
3. You had an escrow shortage
It’s a guessing game when it comes to your monthly escrow amount. If the balance goes below that or into negative territory, you’ll usually be given a choice of paying the sum all at once or over the course of a year (paying one-twelfth more each month). Couple that with higher insurance or property tax, and a house payment can go up dramatically.
4. You have a home equity line of credit
When you take out a home equity line of credit, many times, there’s an introductory period when all you have to do is pay the interest. When that ends, the principal payment begins. And that can be an unpleasant surprise.
So what can you do?
You can appeal if you think your home’s appraised value is too high.
You can work on bring your credit score up.
Lightly use credit cards, pay on time, and keep balances low.