25
Aug
By Mike Pfefferman
Mortgage Tips

What Happens to Your Mortgage When Property Taxes Are Reassessed?

A fixed-rate mortgage provides predictability because your interest rate and principal-and-interest payment remain consistent. However, that does not necessarily mean your total monthly housing payment will stay exactly the same. Property taxes can change over time, and when they do, homeowners who pay taxes through an escrow account may see their monthly mortgage payment change as well.

Why Property Taxes Are Reassessed
Local governments use property assessments to help determine how much homeowners owe in property taxes. Depending on where you live, reassessments may occur periodically, after a property is sold, following major improvements, or because of changes in local property values.
The rules vary considerably by location, which is why buyers should understand how assessments work in the area where they are purchasing.

What Happens When Taxes Increase
If your lender or loan servicer collects property taxes through escrow, a tax increase means more money will need to be collected each month to cover the higher annual bill.
Your servicer generally performs an escrow analysis to determine whether the amount currently being collected is sufficient. If it is not, your escrow portion may increase.

An Escrow Shortage Can Also Affect Your Payment
Sometimes a tax increase creates an escrow shortage because the account did not contain enough money to cover the new bill. Depending on your loan and servicer, you may have options for addressing that shortage, such as paying it separately or spreading the amount over future payments. Your regular escrow contribution may also be adjusted to reflect the new tax amount.

Plan for Changes Before You Buy
When evaluating affordability, do not assume the seller’s current property tax bill will necessarily become your future tax bill. Ask your real estate and mortgage professionals about property tax considerations in your area and include potential changes in your homeownership budget.

Review Your Escrow Statements
Your annual escrow analysis provides valuable information about taxes, insurance, account balances, and changes to your monthly payment. Reviewing it carefully can help you understand why an adjustment occurred.

A fixed interest rate can provide valuable stability, but property taxes remain a separate part of your housing expenses. Understanding how reassessments work can help you budget more accurately and avoid being caught off guard by a future payment change.

19
Aug
By Mike Pfefferman
Mortgage Tips

What Happens to Your Mortgage If You Move Before Paying It Off?

Most homeowners move before making the final payment on a thirty-year mortgage. Selling a home with an outstanding loan is completely normal, but many homeowners are unsure what happens to the remaining balance. Understanding the process can help you plan for your sale, estimate your proceeds, and prepare financially for your next home.

Your Mortgage Is Paid Through the Sale

When your home is sold, the closing company requests a payoff statement from your mortgage servicer. This statement shows the amount required to satisfy the loan through the expected closing date, including the remaining principal, accrued interest, and any applicable fees. Part of the buyer’s funds is then used to pay the mortgage off at closing.

Your Equity Helps Determine Your Proceeds

After the mortgage and other transaction expenses are paid, the remaining funds generally become your proceeds from the sale. Your available equity depends on the home’s sale price, the unpaid loan balance, and selling costs. Reviewing an estimated settlement statement can help you understand how much money may be available for your next purchase or other goals.

The Loan Usually Does Not Move With You

A traditional mortgage is secured by a specific property, so it generally cannot simply be transferred to your next home. When you purchase another property, you will normally apply for a new mortgage based on your current income, credit, debts, assets, and the new home’s value. Certain specialized loans may have different rules, so confirm the details with your servicer.

Timing Both Transactions Takes Planning

If you are selling and buying around the same time, the timing of your closing dates can affect your down payment and moving plans. Some buyers sell first, while others use financing or contract strategies that help coordinate the transactions. Starting early gives your real estate and mortgage professionals more time to identify the best approach.

Check for Liens and Other Payoffs

A mortgage may not be the only amount that must be settled at closing. Home equity loans, lines of credit, property tax balances, or other liens connected to the property may also need to be paid. Reviewing title information and estimated closing figures early can help you understand the net proceeds more accurately and avoid last-minute surprises.

You do not have to remain in a home until the mortgage is fully repaid. In most sales, the outstanding loan is paid from the closing proceeds, and any remaining equity belongs to the seller after other costs are settled. Knowing your estimated payoff and equity can make the transition to your next home much easier to plan.

20
May
By Mike Pfefferman
Mortgage

Understanding PMI and Why It May Benefit You

Private Mortgage Insurance, commonly known as PMI, is often misunderstood by homebuyers. Many people view it as an added expense to avoid at all costs, but that perspective can actually delay homeownership and limit your options. When used strategically, PMI can be a valuable tool that helps you purchase a home sooner and begin building equity earlier.

What PMI Is and How It Works
PMI is a type of insurance that protects the lender in the event a borrower defaults on a loan. It is typically required when a buyer puts down less than 20% on a home. While it does increase your monthly payment, it allows you to secure financing with a lower upfront investment. For many buyers, this creates an opportunity to enter the market without waiting years to save a larger down payment.

Why Waiting to Avoid PMI Can Cost You
Many buyers delay purchasing a home because they want to avoid PMI by saving a full 20% down payment. However, during that time, home prices and interest rates can increase. This can result in paying more for the same home later or missing out on appreciation. In many cases, paying PMI for a period of time is more cost-effective than waiting and facing a higher purchase price.

PMI Is Not Permanent
One of the biggest misconceptions about PMI is that it lasts for the life of the loan. In reality, PMI can often be removed once you reach a certain level of equity in your home, typically around 20%. This means it is usually a temporary cost that helps you achieve homeownership sooner rather than a long-term burden.

Building Equity Sooner Has Real Benefits
By purchasing a home earlier with PMI, you begin building equity right away. As your loan balance decreases and property values potentially increase, your ownership stake grows. This can create financial flexibility and long-term wealth that would not be possible if you delayed buying.

Looking at the Full Financial Picture
It is important to evaluate PMI as part of the overall homebuying strategy rather than focusing only on the added monthly cost. When you consider market conditions, long-term appreciation, and the opportunity to build equity, PMI often becomes a practical and beneficial option.

PMI is not something to fear, it is a tool that can help you move forward sooner and with confidence. Ready for a mortgage? Give us a call today to explore your options.