Why Did My Mortgage Payment Go Up?

Reasons Your Mortgage Payment Can Go Up

Increasing mortgage payments can be an unpleasant surprise. Here are several common reasons you may see an uptick in the amount you owe.

1. Your Property Taxes Went Up

Municipalities determine how much you must pay in property taxes based on your home's value and the local tax rate. To ensure homeowners pay the appropriate amount, local governments periodically assess home values. The frequency of assessments varies based on location. For example, in Maryland properties must be assessed once every three years, but in Georgia assessments take place annually.

When the value of your home or the local property tax rate goes up, so does your tax bill. If your monthly mortgage payment includes money for property taxes, a higher tax bill means a higher mortgage payment.

Learn more: What Are the 4 Parts of a Mortgage Payment?

2. Your Homeowners Insurance Premium Increased

In 2024, the average price for homeowners insurance increased by 10.4% after a 12.7% rate hike in 2023, according to S&P Global. When your premium increases, your mortgage payment will, too, if your insurance costs are included in your monthly bill.

Common reasons insurers increase premiums include recent claims, rising home repair costs, added coverage such as flood or earthquake insurance, and increased occurrences of severe weather events in your area.

Learn more: Why Did My Homeowners Insurance Go Up?

3. Your Escrow Account Had a Shortage

Mortgage lenders and servicers often set up escrow accounts to hold funds for property taxes and homeowners insurance. When your tax or insurance bill is due, the financial institution uses money from the account to pay the amount you owe. If your lender or servicer needs to make up an escrow shortage, your monthly payment may increase. Shortages can occur if your insurance premiums rise or your property taxes increase.

Learn more: Why Did My Escrow Go Up?

4. You Have an Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages have an initial fixed-rate period that typically lasts three, five, seven or 10 years, depending on your loan terms. When the fixed-rate period ends, the rate adjusts periodically—usually every six or 12 months, based on the type of mortgage you have. When your rate adjusts, it may be higher than the initial rate you received at loan origination, increasing your monthly mortgage payment.

Learn more: Pros and Cons of an Adjustable-Rate Mortgage

5. Your Rate Buydown Expired

A rate buydown allows you to pay an upfront fee to temporarily receive a lower interest rate on your mortgage (usually for one to three years). When the buydown expires, the remaining balance accrues interest at the original rate, and your mortgage payment increases.

Learn more: What Is a Mortgage Buydown?

6. Your Interest-Only Period Ended

Some mortgages allow you to make interest-only payments for a set period of time at the beginning of the loan term. Your payments increase when the interest-only period expires and you begin making principal and interest payments.

Learn more: What Is Principal, Interest, Taxes and Insurance (PITI)?

What to Do if Your Mortgage Payment Goes Up

Some increases may be unavoidable, but you might be able to minimize the impact in certain situations. Here are some things to consider if your payment is going up.

• Confirm why your payment is increasing. If you don't know what's causing the increase, review your most recent property tax and insurance bills to find out if they've changed. You should also check the terms of your mortgage to determine whether your interest rate is resetting or a rate buydown has expired. If you can't find the source of the increase, contact your mortgage lender or servicer for clarification.
• Shop for new homeowners insurance. Shopping around and comparing quotes from multiple providers may help you snag a lower premium after a rate increase from your existing insurer. Be sure you're comparing plans with the same coverage types and policy limits that you currently have. Choosing a policy with a lower premium that reduces your coverage may save you money upfront but could cost you more in the long run if you need to file a claim. If you switch companies, let your mortgage servicer know. Otherwise, they may issue force-placed insurance when they receive a cancellation notice from your current insurer.
• Appeal your property tax assessment. When your local government raises the estimated value of your property, you have the right to appeal the assessment if you believe it's inaccurate. If you're able to convince the authorities that their assessment is too high, you might be able to avoid or reduce an increase in your property taxes.
• See if you qualify for tax exemptions. Exemptions can help lower your property tax bill. Common ones include homestead, senior and veteran exemptions. Exemptions vary by location. Check with your local government to find out what exemptions are available and if you qualify.
• Consider refinancing. If you have an adjustable-rate mortgage and your interest rate resets, you may be able to reduce your payment by refinancing to a fixed-rate mortgage if you meet the lender's requirements and can qualify for a lower rate. Getting a lower rate is most likely if your credit has improved or mortgage rates have decreased since you got your initial loan. If you can't qualify for a lower rate, refinancing may still be worth it to avoid future rate increases if you plan to stay in your home long term and have the cash to cover closing costs.

Can Mortgage Payments Go Down?

Yes, in some cases, your mortgage payments may decrease. Here are some scenarios that may result in a lower payment.

• You no longer have to pay private mortgage insurance (PMI). Homeowners who put less than 20% down when purchasing a house typically have to pay PMI. When your loan-to-value ratio reaches 80%, you can ask your mortgage servicer to remove PMI from your loan; when it reaches 78%, the servicer is required by law to remove it automatically.
• You recast your mortgage. Some lenders allow you to apply a lump-sum payment to your principal balance and reamortize the loan, reducing your monthly payments for the remaining loan term. You typically have to pay a mortgage recasting fee, but the process can make your payments more affordable and give you more wiggle room in your monthly budget.
• Your homeowners insurance premium decreased. It's more likely you'll see an increase in your homeowners insurance premium than a decrease. However, installing safety features like an alarm system, preparing your home for natural disasters, qualifying for new discounts or staying claim-free may reduce your rate.
• Your property taxes decreased. Your tax bill may decrease if your home value falls or your local tax rate decreases. You may also see a decrease in the amount you owe if you qualify for an exemption or appeal a property tax assessment and win.

The Bottom Line

There's no guarantee your mortgage payment won't change throughout the life of your loan, but understanding the factors that influence your payment can help ensure you're prepared for potential increases. Shopping around for homeowners insurance, appealing inaccurate property tax assessments and ensuring tax exemptions are applied appropriately to your tax bill can help ensure you don't pay more than necessary.