Most homeowners who choose fixed-rate mortgages do so because they want to avoid the often drastic rate fluctuations associated with adjustable rate loans. But what some borrowers don’t count on with fixed rate mortgages is that they will likely be faced with periodic increases in their property tax and hazard insurance escrows.
As part of the closing costs on your home, you will be required to pay a portion of the first year property taxes and hazard insurance in advance. This money will be put into escrow and paid by the lender who services the loan. For payments beyond that first year, the monthly costs of your taxes and insurance are calculated and built into your mortgage payments. So you will always be making these payments in advance of when they are due.
Inevitably, property taxes and hazard insurance costs will rise year after year. You should absolutely expect your property taxes to increase after the first year since those rates are reassessed after a property is sold based on the new market value. Hazard insurance can increase as well, mainly due to changes in coverage, claims, and natural disasters. In addition, certain areas require homeowners to purchase separate flood insurance.
Some homeowners have success challenging their tax assessments if they can prove that the amount they are paying is exorbitant. If you think you may have a case, speak with a property tax attorney who has experience in your area. Most attorneys can advise whether or not you have a case prior to initiating any action.
For optimum financial stability, fixed-rate mortgages are still the way to go. You can best position yourself and your budget by being aware of the fluctuating costs in advance and taking the necessary steps to prepare for them.
For more information about fixed-rate mortgages offered by Cliffco Mortgage Bankers, feel free to give us a call at (516) 408-7300 or contact us by filling out the form here.