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Explaining The Increase In Monthly Mortgage Payments On Long Established Loans

By Cathy Moran

mortgage payments jump

Why has my mortgage payment increased so much? That’s the question I’m getting from lots of clients recently.

Interest rates are creeping up on variable rate loans, but not dramatically.

For most of those asking, it’s because the interest-only period of their home loan has run.

Loans promised increased mortgage payments

Borrowers forgot that lots of loans written 10 years ago  promised low initial payments of interest only.

While it wasn’t a free ride,  it was cheaper than a fully amortized, 30 year loan.

Appealing, and the interest-only feature probably allowed borrowers to believe that they could afford the house they were buying.

But, time’s up on many of these loans.

And math tells us that when 10 years have passed and the remaining life of the loan is 20 years, it will take larger monthly payments to retire the amount borrowed.

Understanding your loan

The easiest way to see if the loan terms explains the payment increase is to pull out the promissory note.

Many of these notes have some description of unusual terms on the first page of the note, right under the heading “NOTE”.

It may say explicitly, “10 year interest only” or “interest fixed” or “variable interest”.  All of those are among the products peddled before the Great Recession.

The note should tell you when the “change date” on the loan is, and if variable, what index is used as a base for the interest rate calculation.

If you can’t find your note, you can ask the servicer for a copy using a Request for Information under RESPA.  Here’s a how-to for making a request.

Alternatively, you can ask your questions about loan terms directly from the servicer, again, using a Request for Information.

There’s no charge to make such a request, but the timeline for getting an answer can be as much as 30 business days.

If you can’t make the increased payment

If the increased payment is unmanageable, consider seeking a loan modification from the existing lender.

An alternative is to see what your options are to refinance the loan with a new lender, a new loan, and another 30 years to pay.

Be proactive.  The further behind you get on the existing loan, the less attractive you are as a borrower on a new loan.

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Filed Under: Real property & mortgages Tagged With: 2018

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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About The Soapbox

You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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