Why your mortgage payment might change 

In this article: 

• What your mortgage payment includes 
• Why your escrow amount changes 
• Ways you might be able to lower your payment 
• How to prepare for future changes  

For many homeowners, seeing a change in their monthly mortgage payment can be surprising — especially when they have a fixed interest rate. You might wonder: Why did my payment go up? Did something change with my loan? Did I miss a notice? The good news is that most payment changes are normal, predictable and connected to your escrow account, not the terms of your mortgage. 

At Desert Financial, we want every member to feel empowered and informed about their home loan. This guide breaks down the most common reasons a mortgage payment may change, how your escrow account is involved and what to expect when adjustments happen. 

Your mortgage payment has three parts 

Before we dive into what changes, let’s look at what your monthly payment includes: 

1. Principal – The portion that reduces your loan balance 
2. Interest – The cost of borrowing money
3. Escrow– Funds collected to pay your property taxes and homeowners insurance

Your principal and interest stay exactly the same for the life of a fixed-rate loan. 

Your escrow amount, however, can change from year to year — and that’s usually what affects your monthly payment. 

Why your escrow amount changes 

Your escrow account is designed to pay expenses that fluctuate. As those costs rise or fall, your monthly escrow contribution must be adjusted to ensure there’s enough in the account to make payments on your behalf. 

Here are the main reasons your mortgage payment may change: 

1. Property taxes increased 

Property taxes are set by your local county or municipality, and they can change for several reasons: 

• A higher assessed home value 
• Voter-approved bonds or levies 
• Adjusted tax rates 
• Changes in local budgets or school district funding 

Even a moderate tax increase can create an escrow shortage, meaning your mortgage payment may rise to compensate for higher projected expenses. Example: If your county raises taxes by $300 for the year, your escrow portion will increase by about $25 per month. 

2. Homeowners insurance premiums changed 

Homeowners insurance premiums almost always fluctuate from year to year. Insurance companies may adjust your rate due to: 

• Higher construction or repair costs 
• Inflation 
• Reassessment of risk 
• Claim history 
• Changes in coverage 

If your insurance premium goes up, your escrow account needs additional funds to cover the larger payment — which means your monthly mortgage payment will increase. If the premium goes down, you may see a decrease or even an escrow surplus. 

3. You changed insurance providers 

Switching insurance companies mid-year is common, especially if you find a lower rate. But here’s what many homeowners don’t realize: 

If you receive a refund from your old policy and don’t deposit it into your escrow account, your escrow balance may fall short. This can lead to: 

• A shortage 
• A higher monthly payment 
• A temporary deficiency to be repaid 

It’s always best to send your new policy information and any refunds to Desert Financial as soon as possible. 

4. Flood or hazard insurance requirements changed 

If your property is reclassified into a flood zone or if your HOA updates community hazard requirements, insurance costs may rise — and your payment will adjust accordingly. 

5. Mortgage insurance adjustments 

If you have Private Mortgage Insurance (PMI) or FHA mortgage insurance, these costs may shift under certain conditions. 

Common PMI-related triggers include: 

• Reaching 78–80% loan-to-value (LTV) 
• Removal upon request 
• Annual MIP (Mortgage Insurance Premium) changes on FHA loans 

For conventional loans, PMI may drop off — reducing your payment — once you reach the required equity level and meet all eligibility criteria. 

6. Your escrow balance had a shortage or deficiency 

Two terms matter here: Escrow shortage and escrow deficiency. Escrow shortage is the amount needed to bring your escrow account up to the required balance for next year’s expenses. Escrow deficiency means the account was already negative at some point during the year because your tax or insurance bill was higher than expected. 

Shortages or deficiencies may cause: 

• A lump-sum payment request 
• A higher monthly payment (spread over 12 months) 
• A combination of both 

This is very common and happens to nearly every homeowner at some point. 

Why this happens even if you have a fixed-rate loan 

A fixed-rate loan means your interest rate does not change — but your escrowed costs are not fixed. Think of it this way: Your fixed-rate mortgage locks in part of your payment, but taxes and insurance operate independently — and they change regularly. 

If your taxes or insurance rise, your escrow payment must rise. If they fall, your escrow payment may fall. Your lender simply adjusts your total monthly payment to reflect real-world costs. 

Interpreting your new payment statement 

When your monthly payment changes, you’ll receive an Escrow Account Disclosure Statement explaining: 

• Why the payment changed 
• Your new escrow amount 
• Next year’s projected disbursements 
• Any shortages or surpluses 
• Your new total monthly payment 

If anything on your statement doesn’t look right, Desert Financial’s Mortgage Servicing team is always happy to review it with you. 

Can you reduce your payment again later? 

It depends on the situation. You may be able to lower your payment if: 

• Your insurance premium drops 
• Property taxes decrease 
• PMI is removed 
• You pay your escrow shortage in full 
• You successfully refinance or recast your loan 

We can walk you through which options apply to your loan. 

How to prepare for future changes 

Most homeowners see some payment variation each year. Staying proactive can make next year’s adjustment much smoother. Here are a few ways to stay ahead: 

• Review your insurance renewal each year. You may find opportunities to save. 
• Keep mail from your county tax assessor. These notices often preview tax changes. 
• Contact your insurer before switching providers. Ask how refunds are handled and when to send documents to Desert Financial. 
• Use Online Banking to monitor your escrow activity. Your escrow balance and transactions are always available. 

When to contact Desert Financial 

We’re always here to support you with clear answers and member-first service. Contact Mortgage Servicing at (602) 433-7097 or firstmortgageservicing@desertfinancial.com if: 

• Your new payment looks incorrect. 
• Your escrow shortage seems higher than expected. 
• You recently changed insurance. 
• You’d like help reviewing your tax assessment. 
• You want to understand how to reduce future payments. 
• You’re struggling with the new payment amount.