Your mortgage has a fixed interest rate, so why did the monthly payment suddenly increase? In most cases, the loan payment itself did not change. The difference usually comes from the escrow portion of the payment, which covers property taxes and homeowners insurance.
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Why Can a Fixed-Rate Mortgage Payment Change?
A fixed-rate mortgage keeps the principal and interest portion of your payment steady. However, many homeowners also have an escrow account. Your loan servicer collects money each month and uses it to pay your property taxes and homeowners insurance when those bills come due.
If your property taxes increase, your insurance premium rises, or the servicer did not collect enough during the previous year, your required monthly escrow payment can change. That can raise your total mortgage payment even though your interest rate remains exactly the same.
What Is an Escrow Shortage?
An escrow shortage happens when the balance in your escrow account is not large enough to cover the upcoming tax and insurance bills while maintaining the required cushion. Your mortgage servicer performs an escrow analysis, usually once a year, and sends you a statement explaining any shortage and the new payment.
In many cases, you can either pay the shortage in a lump sum or spread it across the next 12 monthly payments. Keep in mind that paying the shortage does not necessarily return your payment to its old amount. If taxes or insurance remain higher, the monthly amount collected for future bills will still increase.
What Veterans Should Review
- Compare your new escrow analysis with the prior year’s statement.
- Confirm that the property tax amount is correct.
- Review your homeowners insurance renewal and shop coverage if the premium increased sharply.
- Check whether you qualify for a Veteran or disabled Veteran property tax benefit in your state.
- Contact your loan servicer promptly if any amount appears incorrect.
Your Mortgage Team Is Still Here After Closing
At Creekside Mortgage, our relationship with you does not end when you receive the keys. If your mortgage payment changes or you receive a confusing escrow statement, call us. We will help you understand what changed and what questions to ask your loan servicer.
We also continue monitoring opportunities for our Veteran clients. When market conditions make a VA Interest Rate Reduction Refinance Loan worthwhile, we can help determine whether the monthly savings justify refinancing. VA home loans are our passion, and our team proudly serves Veterans across Washington, Idaho, Oregon and Montana.
Have questions about your mortgage payment, escrow account or VA loan? Contact Creekside Mortgage and let our experienced VA home loan team help.
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