Why Your Mortgage Payment Changes
Most homeowners are surprised the first time their mortgage payment changes. You fought hard to lock in your rate and budget—so why isn’t the payment the same every month? The truth is, your monthly bill includes more than just principal and interest. Taxes, insurance, and even mortgage insurance premiums are baked in, and they can move. On top of that, some loans are intentionally designed to change over time, like those with temporary buydowns.
Let’s break down the most common reasons your payment changes and how to get ahead of them.
If you pay your mortgage with escrow (most homeowners do), part of each monthly payment goes toward an account your lender uses to pay your property taxes and homeowner’s insurance.
When premiums or taxes go up, the escrow portion of your payment goes up with them. Colorado homeowners in particular have seen this lately, with insurance costs climbing due to hail, wildfire risk, and higher rebuilding costs. Property taxes can also rise sharply after a county reassessment or if you lose an exemption you previously qualified for.
If your escrow account runs short, your servicer has two options: raise your payment to spread the shortage out over the next year, or ask you to make a lump-sum payment. Neither is fun, but both keep your escrow account funded so your taxes and insurance bills get paid on time.
If you put less than 20% down on your home, you may be paying mortgage insurance. On Conventional loans, this is called private mortgage insurance (PMI); on FHA loans, it’s called a mortgage insurance premium (MIP).
The good news is, these don’t typically rise year after year like taxes or insurance do. They remain steady until they fall off—or until you refinance.
This is one of the most overlooked ways to reduce your payment. If home values in your area have appreciated, PMI removal or refinancing out of MIP could shave hundreds off your monthly bill.
Another reason payments change isn’t about escrow at all—it’s baked into the structure of your loan. A temporary buydown reduces your interest rate for the first one to three years of the mortgage, often paid for by the seller or builder. This gives you breathing room upfront, but once the buydown period ends, your payment “steps up” to the full note rate.
Here’s a simple chart showing how buydowns work:
For example, if your note rate is 6.5% and you choose a 2-1 buydown, your first year’s payment is calculated at 4.5%, your second year at 5.5%, and from year three onward you pay the full 6.5%.
Buydowns make sense if you want extra cash in the early years—for renovations, moving expenses, or simply breathing room while your income grows. The key is to know when your payment will step up and plan ahead so the change doesn’t catch you off guard.
Escrow changes hit Colorado homeowners harder than most. Insurance carriers frequently raise rates after severe hail or wildfire seasons, and many now apply higher deductibles or limit roof coverage. County tax reassessments can also create big swings in property values—and therefore property tax bills—leading to escrow adjustments in the following year.
Pair those with the end of a buydown, and it’s easy to see how payments can move by a few hundred dollars without warning if you’re not prepared.
The first step is to read the notice carefully. Was it an escrow analysis? If so, look at the new tax or insurance amounts. Was it a buydown ending? Then confirm the month and the new payment at the full note rate.
Next, act:
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