Lots of my clients lately are asking the same question: why has my mortgage payment increased so much? 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. Borrowers forgot that lots of loans were written 10 years ago that 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…
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