Mortgage Jumps from $4000 to $7000 Per Month (AVOID These Mistakes)

I keep seeing all these people online talking about their mortgages increasing, and that's going to happen to you unless you pay attention to the three reasons for mortgage increases that we discussed today. I'm also going to share my personal experience with mortgage increases, so make sure you stay until the end so you can avoid the issues that I had to deal with. But first, I need you to hit that subscribe button. If you want to get better at real estate investing, you have to follow this channel. Also, if investment properties where you live are simply too expensive, click the link in the description of this video so you can learn more about how I can help you invest out of state. Let's hear from a new homeowner whose mortgage increased by $3,000 per month. I didn't know that when I was building a home, that I was just going to have to pay taxes off the land. And then when a home is actually built, then you got to pay taxes on the actual home and the land, which increased my mortgage by $3,000. I didn't know that. So now my mortgage is increased by $3,000 from what I'm currently paying. And plus, you still got all these other expensive and stuff like that. I don't knock buying a home. I think the goal should always still buy a home, but you should be prepared to know what's to come. Like I said, if they would have told me like, hey, your tax is going to be based off of this number instead of this number in a year. No, that wouldn't have changed my decision. I still would have moved forward. But if they would have told me that, I would have been prepared and not look in the mail and be like, bro, who this for? You feel me? Who is this for? I know y'all ain't trying to increase my mortgage. So one thing you must know, your property taxes are very likely to increase after you buy or build a home. It really frustrates me that this is not something that's really shared that much online. And because of that, I had to deal with my own situations with mortgage increases, but we'll talk about that later. So there are a few reasons that your mortgage payment may increase, but first let's make sure we're all on the same page about how a mortgage generally works. So if your mortgage is escrowed, that means that your principal, your interest, your taxes, and your insurance are all in one payment to the mortgage company. In this scenario, the taxes are paid directly by the mortgage company, as well as the insurance. If your mortgage is not escrowed, then you would pay your taxes and your insurance independently. And you would pay your principal and your interest to the bank or mortgage company. I want you to avoid headaches during the home buying process. So I need you to pay very close attention to what we talk about next. First, I just want to salute the brother in the TikTok video for being so transparent and sharing his story. So what he didn't realize is that he would eventually have to pay taxes for the house and the land. To be honest, his real estate agent or lender should have told him this ahead of time so that he could be prepared for what was to come. Now, fortunately, he was able to afford this $3,000 increase. But the reality of it is most people in this country cannot afford an increase like that overnight. Before you buy a house, I strongly encourage you to go directly to the county tax office, call them, have them explain to you how the tax assessments work in the area you're looking to buy a house in. You can even go as far as saying, I'm looking to buy this house. It costs this amount of money. And what can I expect my taxes to be after I purchase the property and after the taxes are reassessed? You just want to get an understanding of the process and do your own homework. At the end of the day, nobody in the process is going to look out for you more than you. So it's important that you're educated before you get into the process. Now, odds are the property taxes will increase when you purchase a property, especially if you're buying it for more than it was purchased for previously. And the tax office will give you 100% most accurate information so that you can walk into the situation educated and comfortable with your decision and having accurate numbers. Now, the next reason your mortgage might increase is a reason that I really wish the online gurus shared before I started getting into real estate investing. Your insurance payment will change over time. What I wish somebody told me before, and which seems kind of obvious, but it's really not for somebody who's brand new, is that you should shop around for your home insurance every single year. You don't owe loyalty to any of these insurance companies or any other company. You have to look out for yourself and do what's best for you. And if you want proof of that, let's hear from a guy who was suddenly dropped by his home insurance that he had been with for 41 years. I felt like I was blindsided. John Dentermont has owned his Malden home for decades, insuring it with the same company the whole time. He says he was shocked when he got this from his insurer last summer, detailing pricey repairs that needed to be made within 60 days. Get the moss off the roof, trim the tree back that had branches hanging over the house, and get some, in their case they said, get some shingles. Dentermont says he quickly got estimates and reached out to his agent, but he says it wasn't enough. November 3rd, I get a notification that they have decided to cancel my homeowner's policy forthwith. In Massachusetts, insurers have the right to not renew policies as long as they provide a homeowner with 45 days written notice prior to the policy's expiration and specific reasons for the decision. But Dentermont says he's baffled that the company dropped him. In the 41 years with his previous insurer, John says he never once filed a claim and he was never notified of any defects with his home. I'm not going to blame the man for what happened to him. At the end of the day, I don't believe what they did was right. I want to use this as an example of why you should always shop around. This is something that I'm finally getting around to. I recently received a quote that's going to save me over $500 per year on one of my properties simply by switching to a cheaper insurance that still has good coverage. When your mortgage is escrowed, changes in your insurance payment will impact your mortgage amount. If the insurance goes up, your mortgage payment will go down. For the homeowners that are watching, or if you have been a previous homeowner, let me know in the comments, did you shop around for insurance? If you did shop around, did you ever find that you can get lower insurance costs for similar coverage? We'd love to hear from you. The next reason your mortgage may increase is something that I rarely see talked about online, and it's extremely important for us to discuss today. If you have an adjustable rate mortgage, then eventually your mortgage payment is going to change. Here's an overview of how it works. An adjustable rate mortgage, or ARM, is a home loan that has an initial low fixed rate period of several years. After that, for the remainder of the loan term, the interest rate resets at regular intervals. This means that the monthly payments can go up or down. When the rates do change going forward, it'll be at predetermined intervals. An example of what that could look like is the rates will change semi-annually, so twice a year, or annually. ARMs are generally better for borrowers who plan to leave the home or to refinance before the introductory rate period ends. Now, the time that the rate could be fixed in that introductory period, it varies. Some things I've seen out there are three-year terms, five-year terms, seven-year terms, 10-year terms. It just depends. The reality of it is lower introductory interest rates, they're advertised all the time. And I can understand why for many people it's enticing, especially given the fact that interest rates have been higher than normal for several years now. However, it is a big risk because nobody truly knows the direction interest rates are going in in the future. So you could get that low introductory rate and have a nice low payment, but you never know what's going to happen in the future. The interest rates can go up, they can spike again, you just never know. So it's something that you need to think really carefully about before doing it. In my opinion, a fixed interest rate mortgage is probably what's best for the majority of people, but ultimately you have to decide what works best for you. So let me know in the comments, do you prefer a fixed rate? Are you open to an arm? And if you've had an arm in the past, I would love to hear from you. I would love to hear your experience, if it worked out for you, if you would recommend it, if you wouldn't. Looking forward to hearing what you have to say. Now it's time to get personal. Let's discuss my experience with mortgage increases. So I bought my first ever out-of-state property five years ago, and believe it or not, the mortgage was $453. That included taxes and that included insurance. Hearing numbers like that is why I strongly advocate for investing out-of-state, if where you live is simply too expensive. Not too long after that, the mortgage increased to 500. And then a little bit after that, it increased to 600. And this was just in a couple of years time. And then a year after that, it increased to 650. So over the course of several years, my mortgage pretty much increased by $200 because of property taxes. Now, what the gurus didn't say online back when I was getting started was that you'll have cashflow, you'll make all this money, but no one ever said anything about property taxes, which is why I really want to make sure that we go over it. And I share this with you honestly today. Something I also didn't know was that I could contest my property taxes and see if they could lower them again. Thankfully, I was still able to make cash and the rents in the area actually increased tremendously shortly after that. But I understand that that's not everyone's situation. And some folks can find themselves in a tough situation. For this reason, when you're looking for rental properties, you want to be very conservative with your cashflow projections, understanding that your expenses will increase over time. Whether that means property taxes, whether that means insurance, these are all things you want to factor in at the outset so that you're not too surprised when things come up in the future. Overall, I just want to make sure that you do your homework before you buy a home to live in or a rental property. Make sure you're in contact with the county tax office so you understand how taxes work. Make sure that you shop around for your insurance. If you are considering an adjustable rate mortgage versus a fixed rate mortgage, just make sure you look at the pros and cons of each side, depending on your situation, and just make an educated decision. And then also, when you're looking at rental properties, be conservative with your calculations. Don't plan for the best case scenario. Plan for maybe the middle case scenario. Not the worst, but maybe the middle. You're more likely to fall somewhere around the middle at the end of the day. So now that you know about the reasons why your mortgage payment might increase, I want you to learn about a homeowner whose property taxes increase from $1,800 per year to $30,000 per year. Check out this video right here.