How Your Mortgage Payment Can Change Even With A Fixed Rate Mortgage

   Even if you have a fixed rate mortgage (or plan on using one to buy a home), your monthly payment isn’t necessarily set in stone.

   If your mortgage has an escrow account set up to pay your real estate taxes and/or home insurance, you’re not just paying the principal and interest on the amount you financed when you bought your home.  Each month, you’re also paying a portion of your real estate taxes and home insurance (when those bills come due they’re paid from that escrow account you’ve been contributing to).

   So, even if you have (or decide to use) a fixed rate mortgage product when buying a home, your monthly mortgage payment CAN change in the future.  The principal and interest portions of your monthly payment won’t adjust but those other portions (good old taxes and your home insurance) are never ever guaranteed to stay the same for as long as you own the home.

  In all likelihood at some point in the future, your property taxes are going to change.  I’m really not a gambler but when it comes to taxes I’d say an increase has just slightly better odds of happening than a decrease in your real estate tax bill.

   Real estate property taxes can increase change due to across the board tax rate adjustments, changes in property value from a reassessment (Charlotte’s next real estate reassessment is coming in 2010), or even if you add an improvement (not just room additions, even a deck can change the “tax value” of a house).

   Back to how your monthly mortgage payment can adjust – each year your mortgage company will probably do an “escrow account review” and look at whether the amount you’re adding to the escrow account each month is enough to pay your home’s real estate taxes and insurance.   If it’s not….the escrow review can result in an adjusted monthly “tax and insurance” or escrow monthly payment which in turn can change your monthly mortgage amount from what it was when you bought the home. 

   So, yes, even if you have (or choose) a fixed rate mortgage, it’s still possible for your monthly mortgage payment to change at some point in the future.  This is just one good reason why it’s so important to have reserves, a cushion, a “rainy day” fund before AND after buying a home in Charlotte NC.

   One other note specifically related to owning or buying a home here in Charlotte NC:  there are some properties that are not in the city limits of Charlotte and may only owe Mecklenburg County taxes.   If that property gets annexed into the Charlotte NC city limits, there will be a significant increase in the annual real estate taxes since it would then owe city AND county taxes. 

   My advice to home buyers considering buying a Charlotte NC home that has “county only” taxes – be aware there’s a pretty good chance at some point it may be annexed into city limits and that WILL change the real estate taxes.   I’ve been through an annexation as a homeowner here in Charlotte and I can attest it’s an ugly bill to get when those real estate taxes change.  Just be prepared and plan, and please don’t ever ever ever assume there’s any guarantee when it comes to real estate taxes.  As far as I know there’s no insurance policy for that 🙂

For a detailed list and  regular updates with changes to available homes for sale in Charlotte NC that may be of interest, OR for any questions you may have about buying or selling a home in Charlotte NC and how current real estate market conditions may relate to you, contact us.

Related Articles: How to Estimate Real Estate Taxes for a Home in Charlotte NC

Preparing for Buying a Home in Charlotte NC

Don’t Buy Anything Before Closing on Your Charlotte NC Home Purchase!!!

Copyright©2009 by Diane McDermott, All Rights Reserved, “How Your Mortgage Payment Can Change Even With A Fixed Rate Mortgage”
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About dianemcdermott

Diane is deeply passionate about serving single and divorced women home buyers, first time home buyers and new to the area buyers navigate the Charlotte area home buying process. Having navigated separation and divorce she has immense respect for the stress of transition and need for a home living situation that supports and nurtures. She connects and guides clients as they navigate the home buying process, transitioning to a space they'll love calling home. McDermott Real Estate
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