Why your fixed-rate mortgage payment will change overtime

BY THE PERK LENDING TEAM | June 30, 2023 | 1-minute read

Many first-time homebuyers with fixed-rate mortgages can be surprised when they notice a change in their required monthly mortgage payment. We get it! Below is a list of the costs that can and likely will change over the life of your fixed-rate mortgage loan.

Mortgage Insurance

Mortgage insurance is calculated off the outstanding loan amount. As you pay down your loan principal, your required mortgage insurance payment will decrease.  With conventional loans, your mortgage insurance requirement can be dropped completely once you have 20% equity in the property. FHA loans require mortgage insurance throughout the life of the loan.

Homeowner’s/Flood Insurance

The cost of insuring your home can increase each year. Severe weather, natural disasters, rising inflation, aging of your home, and filing claims can raise annual insurance premia, increasing your escrow payment. We recommend shopping insurance providers each year to ensure you’re getting the best deal.

Property Taxes

Each year, the county property appraiser assesses the value of your home and uses the millage rate to determine your property tax bill. Millage rates and your home’s assessed value can increase, leading to higher property tax bills and a higher escrow payment.

Homeowner’s/Condo Association Dues and Assessments

If you live in a community managed by an HOA or COA, your dues can increase each year at the board’s discretion. If the association’s cash reserves cannot cover a necessary cost, they can assess an additional fee, know as a special assessment, to be paid by all residents. Special assessments can be several times the cost of regular dues and can be spread out over several years.

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