 Sam
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Joined: 21 May 2005
Posts: 281
Location: CALIFORNIA
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 Posted: Fri Apr 02, 2004 5:56 am Post subject: Can my monthly payment amount change? |
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The monthly payments may change for both fixed rate as well as adjustable rate mortgages.
- For Fixed rate borrowers:
Fixed rate mortgages require almost stable payments except for changes in the property taxes and insurance premiums. The insurance premiums include those of homeowner's insurance including hazard insurance. The insurances and taxes are deposited in a separate account called the escrow account. The deposit in this account varies during the year due to tax assessments, rate hikes and adjustments in the insurance premiums.
- For ARM borrowers:
The monthly payment changes as a result of variation in interest rates due to rate adjustments at regular intervals. The interest rates fluctuate on account of changes in the market rates. On keeping with the changes in the rates, the monthly payments also change.
Your lender may charge higher payments for the escrow account in order to maintain a cushion or excess balance in the account. This is mainly done to compensate for any unexpected increase in the following year's taxes and insurance payments. As a result, your monthly payments may vary even if you have a fixed rate mortgage. |
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