Why Did My Mortgage Go Up?! An Expert Explains Why My Payments (& Maybe Yours) Have Spiked

When my partner and I bought a house in the summer of 2020, we did our due diligence. We found a cute but neglected home in a ~just OK~ neighborhood and underbid. While many of our friends were house-poor, we were determined not to make the same mistake. We bought a house with a payment that would fit our budget, even if one of us lost our job.

Then our payment doubled, seemingly out of nowhere.

Our Midwest community reappraises property values every three years, so for three years, we did fine. The closer we got to the reappraisal, the more murmurs (and soon uproar) we heard about homes all over the city being evaluated at exorbitant values. Our house, with leftover knob-and-tube wiring, a leaking basement, and some sketchy neighbors, got valued at twice what we paid.

We laughed it off. Having never owned a home before, we thought they were simply telling us what our house might be worth if we sold it. A few months later, I signed in to pay our mortgage, and it was double the usual payment. Double. Had I forgotten a payment? Was I late? Nope.

Because our property value went up, our taxes went up, and because our taxes went up, so did our mortgage payment. I write (i.e., what you’re reading) to help pay bills. My partner is a chef who took a step back a few years ago to work as “a lunch lady” in exchange for more regular hours and less stress. I qualify for Medicaid. Half of our grocery budget is paid for with food stamps. Paying double our mortgage isn’t just stressful; it’s not an option.

What followed was a million calls to a thousand people to determine if we should start selling everything we own and prepare to move into a box. We’re currently a little calmer, but life is still tenuous since we’re still attempting to pay our double mortgage payment for the next six months.

As millions of American homeowners face or prepare to face similar situations, it seemed only natural to share my experience and what I learned from experts along the way. So, keep reading if you, too, have been wondering, Why did my mortgage payment go up?!

How do property value assessments work?

Property value assessments happen across the country at varying times. While some jurisdictions do annual assessments, others only do them every two or three years. In other words, once you receive your new assessment, it can feel like you’re stuck with that value for a while. But how do they even decide on the values?

“Local governments conduct these assessments to determine the market value of properties within their jurisdiction,” shares Brian Quigley, founder of Beacon Lending. “Assessors may consider various factors like the property’s size, location, condition, and recent sale prices of comparable properties. The assessed value serves as the basis for calculating property taxes, with homeowners taxed based on a percentage of this value. If property values skyrocket in an area, homeowners may see an increase in their property tax bills.”

If you’re investing in your home, improving things in hopes of someday “movin’ on up,” a higher property value can feel like a good thing. But it also raises your taxes, which means more money out of your pocket.

WTF are escrow accounts?

If you’re wondering why your mortgage went up, a secondary question goes hand in hand: Why did my escrow go up?

Many homeowners rarely ever physically pay their own property taxes (or homeowners insurance). So, your property values and, thus, your property taxes don’t necessarily feel all that pertinent. Still, you’re paying them whether you realize it or not.

“Lenders set up escrow accounts to manage certain expenses related to the property, such as property taxes and insurance premiums,” explains Quigley. “Homeowners contribute a portion of these expenses to the escrow account as part of their monthly mortgage payments. When bills are due, the lender uses funds from the escrow account to pay them on behalf of the homeowner. This helps ensure that property taxes and insurance premiums are paid on time, protecting both the homeowner’s and the lender’s interests.”

What if there’s not enough money in your escrow account?

When your lender uses your escrow account to pay your taxes, etc., they know that your continued mortgage payments will continue to feed into that account and act like a buffer. When your taxes rise, they sometimes drain escrow accounts too low or into the negative. Banks fix this by bumping up your mortgage rate so that you’re quickly shifting money back into that escrow account to cover what you already owe and what you’ll owe in the future. In reality, though, there are many reasons your mortgage might fluctuate.

“Mortgage rates can vary due to factors like economic conditions, inflation rates, and central bank policies,” says Quigley. “When rates rise, homeowners with adjustable-rate mortgages or those seeking new loans may face higher monthly mortgage payments. This can strain household budgets and make homeownership less affordable. Conversely, falling rates can present opportunities for homeowners to refinance their mortgages at lower rates, potentially reducing their monthly payments and saving on interest costs over time.”

In most cases, people only see small shifts in their payments. With the gigantic leap in inflation and home values recently, property taxes and mortgage payments could jump significantly, even if for only a matter of months. “Your payment may go back down in six months, especially if it’s due to an adjustment in your escrow account to cover property taxes,” explains Quigley.

How can you “fix” the situation and ease the pressure?

Here’s how to lighten the financial load you’re shouldering.

Get on the horn.

Talk to your mortgage company (lender). After talking to our bank, we felt better in learning the rise was only temporary to bump up our escrow account again. We’ll take on extra work and cut back on spending for the next few months to bridge the gap. Even so, it’s hard to trust banks. If you’re worried that six months of scraping and pinching will be followed by still-too-high payments, ask your lender to show you in writing.

“You can certainly ask your lender to provide a detailed breakdown or spreadsheet showing how your payments will be structured over the next 12 months,” shares Quigley. “This information should include principal, interest, taxes, insurance, and any adjustments to your escrow account. It’s better to have clarity on your payment schedule to understand how changes in expenses will affect your monthly mortgage payments.”

Fight the new assessment.

“Homeowners who might be dealing with higher property taxes may look into short-term solutions such as appealing their property assessments or adjusting their budgets to accommodate increased expenses,” says Quigley. “Appealing an assessment involves providing evidence to the local assessor to challenge the property’s valuation. Budget adjustments may include reallocating funds from discretionary spending to cover higher tax bills temporarily.”

Admittedly, appealing the assessment can be challenging. You typically have a tiny window of time to appeal, and we missed ours. It also involves collecting a ton of assessments and potentially even paying out of pocket for a private appraisal. It’s a long, convoluted process, but it can be done.

Look for local aid programs.

Many jurisdictions, especially those with large urban areas or lower-income populations, offer tax assistance. Search for “tax assistance” + [your location] to find the best agency to help you. Then, talk with the tax assistance agency and your bank to determine how to qualify, how it works, and if it’s right for you.

Consider pulling from savings to fill your escrow account.

If you have a decent-sized nest egg that could quickly replenish your escrow account (without causing you stress or putting your financial future at risk), talk to your bank about using a portion to maintain your current monthly payment.

Cut back elsewhere.

As Quigley mentioned, covering the rising mortgage cost might mean cutting back on the extra stuff for a while. My family sticks to a pretty tight budget already, so it boils down to finding extra work this summer. Other families might consider alternatives like canceling the private pool membership or cutting back on the number of camps each kid signs up for this summer.

Whether your mortgage jumped $50 or $500 depends a lot on where you live, and how you can adjust to handle it depends a lot on your financial situation.

Consider refinancing.

“Long-term solutions could involve refinancing the mortgage to secure a lower interest rate or extending the loan term, thereby reducing monthly payments,” suggests Quigley. “Refinancing can help homeowners manage affordability challenges and align their mortgage payments with their financial goals. Furthermore, homeowners may have to reassess their overall financial situation and goals, considering factors like retirement planning, savings strategies, and investment opportunities to ensure sustainable homeownership in the long run.”

If you locked in one of those sweet, historically low interest rates in 2020, refinancing at 2024’s rates may seem like a terrible idea. Our expert says maybe not.

“I believe that refinancing now could still be a smart move for homeowners who bought in 2020, even though interest rates have risen slightly since then,” says Quigley. “While rates may not be as low as they were, they are still relatively favorable compared to historical averages. Refinancing could lower your monthly payments, reduce your interest rate, or shorten your loan term, depending on your financial goals and circumstances. I would still recommend you carefully look into the potential benefits and costs of refinancing based on your individual situation and consult with a mortgage expert who can give you a more detailed plan and suggest the best course of action for your situation.”

In other words, while the internet can be a great jumping-off point and a great place to find a bit of reassurance, you should also talk with someone who knows your situation. Sit down with your lender or another bank, bring your paperwork, and be prepared to sift through all the options.