Can My Monthly Mortgage Payment Change?

By: Karen Lawson
Loan Page Columnist

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The appeal of a fixed rate mortgage (FRM) is its predictability--Your interest rate is fixed, and the monthly installments of principle and interest (P&I) are the same throughout the life of your loan. However, if your lender pays taxes, hazard insurance and PMI for you, your payments will change according to the cost of these items.


I Have a Fixed Rate Mortgage. How Can My Payments Change?

If your loan to value ratio (LTV) was higher than 80%, your mortgage payment includes estimated amounts for payment of property taxes and hazard insurance. You may also have to pay for private mortgage insurance, or PMI. Typically, your lender projects the annual amount needed to pay for these expenses, divides the annual estimate by 12, and adds the result to your principle and interest payment. Here is an example. This example is for illustrative purposes only.

Estimated annual property taxes $1200
Estimated hazard insurance premium $800
Annual PMI premium $400
Total estimated annual expenses $2400
Annual amount divided by 12 $200

In this case, the amount of $200 would be added to your monthly P & I payment. Each year, your lender will recalculate estimated costs for the coming year. Your mortgage company will send you a statement of funds it holds in escrow, the funds it paid out, and what will be needed to pay expenses for the coming year. Your loan payments will adjust each year. Your lender can answer questions about adjustments in the amount of your home loan payment.

Fannie Mae Website

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage lending. She earned an MA degree in English from the University of Nevada, Reno

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