Fixed Rate Mortgage Payments Increasing for New Investor

Boston, Massachusetts
Starting Out
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Fixed Rate Mortgage Payments Increasing for New Investor

Jeff Rocheleau
Member since 2022 · 5 posts · 2 votes

I swear I spent hundreds of hours and watched dozens of videos about getting started with multi family real estate and NEVER came across this issue, WHICH HAS HAPPENNED TO ME TWICE OUT OF TWO PURCHASES.

In 2022 I bought my first 4 family which I occupied. The other 3 rents barely covered the mortgage payments, but I was living (nearly) free so I was happy - until 3 months later when the town reassessed the property and my mortgage payment went up by almost $300/month or 10%.

Fast forward 2 years and I buy a 3 family which I move into. The 2 rents nowhere near covered my mortgage payments, but the income from my first property offset the difference - until last month. The town reassessed the new property adding $200/mo to my payments, AND my insurance premium on the new building doubled, increasing my already too high mortgage payment by almost SEVEN HUNDRED DOLLARS/mo!

This blows my monthly budget out of the water. I was forced to sell the second house and move back into the first one. Lucky for me I didn't lose any money on the sale, but I am pissed at Bigger Pockets and their kind for not making us newcomers aware of these kind of real estate pitfalls.

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Joan Sambo
Member since 2020 · 17 posts · 10 votes
1y

Lol it sounds like you are lashing out at BiggerPockets for your own lack of research and knowledge on how these things work. Your mortgage payment is really just PI (out of PITI). It is your option (or your lender in some cases) to include an escrow account and collect the taxes and insurance payment which are not paid monthly btw, and include it in your total mortgage payment to the bank. The bank only keeps principal and interest which is what never changes in a fixed tate mortgage.

Technically, your debt payment does not go up, your ownership obligations like insurance and taxes can and will go up. 

Next time do a little bit more research before buying whatever just for the sake of buying and then coming back here blaming this community for your lack of research. Or just don't invest at all if these things are too hard to comprehend. We can't all be investors.. 

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  • Jack Matthias
    Lender · Chicago · Member since 2023 · 176 posts · 70 votes
    1y

    Well if you got a fixed rate mortgage your principal and interest did not change. It sounds like we learned that taxes and insurance can and do change.

    1Reply
    • Jeff Rocheleau
      OP
      Member since 2022 · 5 posts · 2 votes
      1y
      Quote from @Jack Matthias:

      Well if you got a fixed rate mortgage your principal and interest did not change. It sounds like we learned that taxes and insurance can and do change.


       Thanks jack. My question is - with so much content out there - some of it paid - why isn't this little nugget ever mentioned?

      0Reply
  • Joan Sambo
    Member since 2020 · 17 posts · 10 votes
    1y

    Lol it sounds like you are lashing out at BiggerPockets for your own lack of research and knowledge on how these things work. Your mortgage payment is really just PI (out of PITI). It is your option (or your lender in some cases) to include an escrow account and collect the taxes and insurance payment which are not paid monthly btw, and include it in your total mortgage payment to the bank. The bank only keeps principal and interest which is what never changes in a fixed tate mortgage.

    Technically, your debt payment does not go up, your ownership obligations like insurance and taxes can and will go up. 

    Next time do a little bit more research before buying whatever just for the sake of buying and then coming back here blaming this community for your lack of research. Or just don't invest at all if these things are too hard to comprehend. We can't all be investors.. 

    2Reply
    • Jeff Rocheleau
      OP
      Member since 2022 · 5 posts · 2 votes
      1y
      Quote from @Joan Sambo:

      Lol it sounds like you are lashing out at BiggerPockets for your own lack of research and knowledge on how these things work. Your mortgage payment is really just PI (out of PITI). It is your option (or your lender in some cases) to include an escrow account and collect the taxes and insurance payment which are not paid monthly btw, and include it in your total mortgage payment to the bank. The bank only keeps principal and interest which is what never changes in a fixed tate mortgage.

      Technically, your debt payment does not go up, your ownership obligations like insurance and taxes can and will go up. 

      Next time do a little bit more research before buying whatever just for the sake of buying and then coming back here blaming this community for your lack of research. Or just don't invest at all if these things are too hard to comprehend. We can't all be investors.. 


       I'm glad you think it's funny Joan. I feel like your comment embodies the quintessential realtor attitude which is basically, "Yeah I could have warned you, but how would that help me?"

      0Reply
    • Joan Sambo
      Member since 2020 · 17 posts · 10 votes
      1y

      @Jeff Rocheleau Just own up to your mistakes. If I buy a bad investment because I didn't do due diligence as I should have, I can't come here and blame the people on the forum for not telling me or warning about something I should have done prior to putting my money into it...

      0Reply
  • Nick BelskyBusiness Member
    Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
    1y

    @Jeff Rocheleau

    Definitely sucks, especially if you are in an area that is experiencing increase HOI or tax rates.  However, this isn't really a BPC issue so much as your loan officer.  Whomever originated your loan should have discussed this with you, not to mention in the loan docs there is a paragraph or two talking about escrows and how they are updated each year to reflect what your HOI carrier and taxing authority bills.  You would have signed off on this in your loan package.  Assuming you signed a fixed rate mortgage, your interest and principal payments will not increase throughout the entire loan term.  

    The good news is that you can always reach out to your carrier or even other carriers to shop your HOI coverage to better rates and keep your monthly payment down.  There's little you can do with taxes save the county/city saying your property is worth far more than it is and you dispute the value.

    While the BPC is a wonderful resource for learning, every single situation cannot be expected to be covered.  That's just not realistic.  

    Cheers!

    [email protected]
    Belsky Mortgage, LLC527 Reviews
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    • Jeff Rocheleau
      OP
      Member since 2022 · 5 posts · 2 votes
      1y
      Quote from @Nick Belsky:

      @Jeff Rocheleau

      Definitely sucks, especially if you are in an area that is experiencing increase HOI or tax rates.  However, this isn't really a BPC issue so much as your loan officer.  Whomever originated your loan should have discussed this with you, not to mention in the loan docs there is a paragraph or two talking about escrows and how they are updated each year to reflect what your HOI carrier and taxing authority bills.  You would have signed off on this in your loan package.  Assuming you signed a fixed rate mortgage, your interest and principal payments will not increase throughout the entire loan term.  

      The good news is that you can always reach out to your carrier or even other carriers to shop your HOI coverage to better rates and keep your monthly payment down.  There's little you can do with taxes save the county/city saying your property is worth far more than it is and you dispute the value.

      While the BPC is a wonderful resource for learning, every single situation cannot be expected to be covered.  That's just not realistic.  

      Cheers!


       Thanks for the compassion, Nick. I guess I'm disappointed not just with BP, but with social media in general for not bringing up such potentially devastating glitches in the system. I blame my buyer's broker more than anyone though. He's supposed to be acting as my fiduciary

      0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y
    Quote from @Jeff Rocheleau:

    I swear I spent hundreds of hours and watched dozens of videos about getting started with multi family real estate and NEVER came across this issue, WHICH HAS HAPPENNED TO ME TWICE OUT OF TWO PURCHASES.

    In 2022 I bought my first 4 family which I occupied. The other 3 rents barely covered the mortgage payments, but I was living (nearly) free so I was happy - until 3 months later when the town reassessed the property and my mortgage payment went up by almost $300/month or 10%.

    Fast forward 2 years and I buy a 3 family which I move into. The 2 rents nowhere near covered my mortgage payments, but the income from my first property offset the difference - until last month. The town reassessed the new property adding $200/mo to my payments, AND my insurance premium on the new building doubled, increasing my already too high mortgage payment by almost SEVEN HUNDRED DOLLARS/mo!

    This blows my monthly budget out of the water. I was forced to sell the second house and move back into the first one. Lucky for me I didn't lose any money on the sale, but I am pissed at Bigger Pockets and their kind for not making us newcomers aware of these kind of real estate pitfalls.


     I think a lot of new investors forget that investing has risks. There is no such thing as a risk free investment, unless you are parking your money in a CD or Bond. 

    I don't think it is right to blame BiggerPockets as they are just a resource outlet for investors. It is up to you to make sound judgement, ask all the questions, and understand what you are getting yourself into. 

    I also wouldn't blame your loan officer either as their task is to get you qualified and to the closing table, not check your tax basis and insurance premiums. This is more of a general servicing issue that happens with ANY type of loan. 

    The best thing you can do moving forward is fight the assessment with your county to lower your tax bill and shop for insurance. Make sure you contact your servicer as well to advise them on these changes. They are always going to collect more just in case insurance or taxes are higher than anticipated. 

    Who knows why BiggerPockets doesn't make content about impounds. Maybe that would be a great idea on a video or post. It's not something that people really ask about, and they are not a lender either. Best thing you can do is fix the problem yourself, and make sure to review all documents before signing anything. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    1y

    Let me see if I understand this

    - you somehow did not think that expenses could change usually in the direction of increasing

    - this in spite of the loan documents having text that discusses escrow holdings and that they adjust.

    - this in spite of having it occur on your first purchase.   Seeing that you had 1st hand experience that escrow fees can and often does increase, how can you be surprised that your escrow holding increased on your 2nd purchase?

    What sort of warning did you expect?   Expenses can and often do increase.

    Let me help you out, if you do not get a fixed rate loan, your principle and interest can fluctuate.

    Let me help you out more…

    - property prices can fall

    - rent can decrease

    - RE, especially residential RE, is not typically passive

    - natural disasters can and do occur.

    - rehabs can cost more and take longer than the estimate.

    - your flip may not sell for the antipated ARV.

    - RE is not typically a get rich quick investment.  I suspect this is more true in this market than it was in the dozen or so years since the GFC

    - this is not intended to be a complete list of the risks or effort associated with RE investing. 

    Good luck

    1Reply
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