Monthly Payments On Mortgage Out of Control

by Tired of the Payment Game
(Wichita, Kansas USA)

Ask Kate why are monthly payments on my mortgage so out of control: Kate, I bought a house in 2002 at $74,500 with a FHA loan. At that time my mortgage payment was $630.26. Now it is 2011 and my monthly house payments have jumped to $908.60.

"Tired of the Payment Game" continues... I have asked the mortgage company why my payment is so high and they say it's my homeowner's insurance causing it to go up. I didn't know this was possible. Is it? and how so? I live in Kansas, not sure if that helps.

Kate Answers: Monthly Payments On Mortgage So Out of Control

Dear Tired of the Payment Game in Kansas,

Yes, a 33 percent increase to monthly house payments is major.

Assuming you do not have an adjustable rate mortgage, let's take a look at these 2 common culprits.

1. Homeowner's Insurance - First and foremost, Homeowner's Insurance provides coverage for damage due to fire. With extended replacement cost, the policy replaces the structure if destroyed or damaged beyond repair.

Often, the fire coverage is bundled in a policy that also limits liability and insures personal belongings. This is why it is called a homeowner's insurance policy, not merely fire (or hazard) insurance.

As with other insurance policies, your premium increases over time, causing monthly payments on your mortgage to rise.

Ask Kate Tip: When you shop for homeowner's insurance, don't base a decision solely on an initial low quote. Look for an insurance agent you can trust. More on a Homeowner's Dream Team at How to Get a Mortgage Part 6 - Meet Your Insurance Agent.

2. Real Estate Property Taxes - An increase in your county's property tax assessments could also be affecting your monthly house payments.

Property tax assessments are different from the market appraisal you paid for when you bought your home. Counties calculate the amount they charge for property taxes on an annual or every-other-year assessment. 1/12 of this amount is added to your monthly house payments.

Ask Kate Tip: Review your annual escrow account disbursement report from your lender. Use it to track homeowner's insurance and property tax payments, and to verify that your basic principal and interest payment has not changed.

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