Each period mortgage payment is in fact a combination of several payments: towards the interest, towards the principal (if the mortgage is not interest-only) and optionally towards PMI and the escrow. With a fixed rate mortgage the interest and the principal parts are usually unchanged unless you make extra payments, but the PMI and/or the escrow can get altered. Under the provision of the 1999 Federal law, for example, lenders are required to cancel private mortgage insurance (PMI) on most home mortgage loans made after July 29, 1999. Cancellation will occur automatically when amortization has reduced the loan balance to 78% of the value of the property at the time the loan was made. So if you have been paying PMI for years, it may well be that it just got cancelled after all. It’s a one-time event, though, and is not very likely to affect every year’s payments. The escrow payments, however, are more dependant on external factors. If taxes and/or insurance premiums, for instance, go up, the lender needs more funds to cover the rise. Thus, even if your mortgage is a fixed rate mortgage with what you expect to be quite even payments, the actual amount of money you have to pay each month can change because of the escrow. If taxes rise, you should expect an unavoidable rise in the payment.
