May 25, 2023
Could the monthly amount due on an FHA mortgage increase over time? If you want a fixed-rate mortgage, that may seem like a silly question.
After all, isn’t the idea behind a fixed-rate home loan to provide predictability and stability in the payments?
The short answer is yes, but there are still factors that could change the total amount of mortgage-related expenses over time.
Depending on circumstances, the amount you owe each month may change depending on variables such as changes in your insurance, property taxes, and homeowner’s association fees.
Adjustable Rate Mortgages
Your monthly mortgage payment will change if you have an Adjustable Rate Mortgage or ARM loan. An ARM loan features an introductory period with a (typically lower) “teaser” rate, but once that introductory period ends?
The home loan experiences “periodic adjustments” based on the schedule you and the lender agree to. The interest rate will change, and so will your monthly payment.
If your home loan payments seem higher and you don’t know why, check your statement. There may be new fees or fees you overlooked previously. Contact your lender to see if you have been charged new fees or if there is an error on your account.
If your property taxes go higher (likely) or fall (less likely depending on the housing market), and you use escrow to pay those taxes, you’ll naturally have to change the amount paid into an escrow account for these expenses.
Homeowner’s Insurance Premiums
No, it’s not part of your principal and interest calculations, but homeowner’s insurance is an important part of your mortgage obligation.
Insurance policies and payments may change for any number of reasons including added coverage or changing premiums based on market fluctuations.
If you use escrow to pay your insurance, the amount you pay into the account may change over time, thus affecting your overall mortgage budget.
Mortgage insurance is quite different than homeowner’s insurance, but depending on the term of the loan, the loan amount, and other variables, some FHA mortgages have the option to cancel the insurance after 11 years. Your mortgage payment may decrease as a result of the cancellation.
Homeowner’s Association Dues
Have your fees increased for your Homeowner’s Association? That also affects your mortgage budget and you’ll want to recalculate the amount you must set aside after any changes in the fee structure of your HOA.