What to Do When Your House Payment Is Too High

By Chandler Crouch

“My tax bill is too high. I can’t afford the house!!!”

If that sounds familiar, I want you to look through these options before you decide you have to move. Some are pretty easy. A few require a phone call. Others involve bigger decisions, but I want you to know what your options are.

Our goal will be to help you find a way to stay in your house. If you've determined that you must move, we can help you figure that out, too.

Here is where I would start.

Take 5 minutes to call your lender

No really, it's easy.

If your monthly mortgage payment has increased, look at your escrow statement. There is a good chance your taxes and/or insurance have gone up.

Your mortgage company collects money each month to pay those bills. When the bills are higher than expected, you can end up with an escrow shortage. Your new payment may include both the higher cost going forward and extra money to catch up on the shortage.

Your mortgage company likely uses a 12-month payment plan by default to pay off that shortage, but you may have additional options.

Call and ask:

“Can you spread my escrow shortage over 24 or 36 months instead of 12?”

For example, a $3,600 shortage spread over 12 months adds $300 to your monthly payment. Spread that same shortage over 36 months and the shortage portion becomes $100 a month. That's $200 a month you could keep in your checking account while you get caught up.

You still owe the money, and this doesn't undo an increase in taxes or insurance. It gives you more time to pay the shortage. The mortgage company has to agree to the extension. The federal escrow rules allow repayment periods longer than 12 months, but they don't guarantee you a 24- or 36-month plan.

Please let me know if your mortgage company agrees or refuses. It will help me help others.

Shop your insurance

If your house payment went up, your insurance might be the reason. That happens a lot, and many people pay too much without knowing it.

It can be tricky to figure out which company to trust for a fair quote. We hear from lots of people who shop around, so we get a good idea of which companies are offering the best deals right now. If you want to know which companies have been giving good quotes lately, just email our office.

Get a few quotes and compare the coverage. Look especially at your roof coverage and deductible. A cheaper policy can leave you paying a lot more when something goes wrong. The Texas Department of Insurance has a simple checklist of questions to ask.

Once you lower the premium, call your mortgage company again. Send them the updated insurance information and ask for a new escrow analysis. Ask when the savings can show up in your monthly payment.

The same goes for a corrected tax bill. Make sure your mortgage company is working with the right numbers.

Triple check that your exemptions are in place

Look up your property on your appraisal district's website. Make sure your homestead exemption is actually there. Check for any other exemptions you qualify for, including age 65 or older, disability, or disabled veteran exemptions.

Even if you had an exemption last year, check again. Open the mail the appraisal district sends you, especially anything asking you to verify your eligibility.

If something is missing, contact the appraisal district. Ask what you need to submit and whether the correction can apply to prior years. Texas allows some late homestead exemption applications, so don't assume you missed your chance.

After it's corrected, follow through with the tax office and your mortgage company. You want the exemption reflected in the bill and in the amount being collected from you each month.

Protest your property value and prepare before the deadline

Take photos of issues. Get repair quotes. Save the quotes and invoices to use as evidence in your protest. File them away so you can find them when it's time.

If we got your proposed value reduced and your taxes still went up, that doesn't necessarily mean something went wrong. The final value may still be higher than last year's, and tax rates, exemptions, and appraisal caps affect the actual bill.

Look at the tax bill itself. A reduction in the proposed value doesn't always create tax savings, especially when your homestead cap was already keeping your taxable value below that amount.

We help homeowners protest their property values for free. You can find information about our service at FreeTaxProtest.com.

Drop PMI if you qualify

Ask your lender if they are charging you private mortgage insurance, or PMI. If you bought with less than 20% down, it may be bundled into your house payment.

You may have more equity now because you've paid down the loan, your home has increased in value, or both. That could give you a way to remove PMI without refinancing your mortgage.

Call and ask what documentation they need. It may be much easier than you think.

The rules depend on your loan, payment history, and how the lender determines your equity. A higher home value alone doesn't guarantee removal, and FHA mortgage insurance works differently. Here are the PMI cancellation rules if you want to dig into the details.

Cut your utility bill

Shop for better electricity rates. Compare plans using your actual usage, including your high summer months. Look at the fees and bill-credit requirements before you get excited about the advertised rate.

I saved over $1,000 with Energy Ogre. It almost feels like magic. I liked it so much that we partnered with them. They shop electricity plans for a membership fee, and using our link helps support our free property tax protest service. Check their current terms and what they can save you before signing up.

Making some simple changes around your home can also add up:

• Close blinds and curtains on the sunny side of your home.
• Keep HVAC filters clean and have the system maintained.
• Seal air leaks around doors and windows.
• Use cold water for laundry when you can, and line dry some of it.
• Turn off the dishwasher's heated drying setting.
• Use LED lighting and turn lights off when you leave the room.

Pick the changes that fit your house and routine. You don't have to do everything on the list.

See whether refinancing actually helps

Refinancing can lower your payment by reducing your interest rate or giving you longer to pay off the loan. Some people can still benefit even when rates aren't as low as they would like.

Get quotes from your bank, an online company, and an independent lender. Ask what the new payment includes and how much the closing costs will be. Compare the total interest you'll pay, too. Starting over with a longer loan can lower your payment while costing more overall.

Using home equity to pay off credit cards or other debt could also be a smart decision, but look at the whole picture.

Add up your current mortgage payment and the payments on the debts you would pay off. Then compare that total with your new mortgage payment. Even if the mortgage payment increases, your total monthly expenses could drop significantly.

That gives you some breathing room. If your budget allows, you could apply some or all of the difference toward your mortgage principal to pay it off early.

The tradeoff is that you're moving those debts onto a loan secured by your house. You also need a plan to keep the credit card balances from coming right back. Otherwise, you could end up with a bigger mortgage and another pile of credit card debt.

You may also hear that you can “skip” a payment when refinancing. Ask where the interest and costs go. A later first payment doesn't mean the month was free.

Have the lender show you the numbers for your situation before you decide.

Look at the rest of your monthly bills

Eliminate debt where you can. Cut down on luxury items. Look through your bank and credit card statements for subscriptions you're not using and expenses you could do without.

That money could help cover the house payment. If selling something you no longer need would let you pay off a debt and eliminate its monthly payment, put that option on the list, too. Keep enough cash available for the bills coming due.

Ask the tax office about splitting your payment

If you pay your property taxes yourself, a payment option may help you manage that big bill.

In Tarrant County, you can generally pay half by November 30 and the other half by June 30 without penalty or interest when you properly use the half-payment option. Qualifying homeowners with age 65 or disability exemptions also have a quarterly payment option.

Contact the tax office before the deadline and ask how to set it up. Check the county's current payment instructions, including how to mark your payment. If your mortgage company pays your taxes, coordinate with them first.

If you haven't received your tax bill, find out why. Don't wait for the mail and assume the deadline went away.

Rent out space you already have

An extra bedroom isn't the only space somebody might pay to use.

You could rent out a garage apartment, take in a roommate, or rent out space in your garage for someone else's storage. Depending on your property, you may have room for vehicle storage, too.

Here's one people don't usually think about: allow people to shoot movies or other productions at your house. The Texas Film Commission explains how to submit your property. I wouldn't count on it to cover next month's mortgage, but it's an option.

Check your HOA rules, local requirements, and insurance before renting out space. Figure out what you'll actually keep after the extra expenses and work involved.

Solve the cash flow crunch by making extra income

There are only so many expenses you can cut. Sometimes the biggest help is finding another way to bring money in.

When fear sets in or you get filled with emotion, creativity evaporates and you become less resourceful. That doesn't mean you are incapable of coming up with good ideas. You absolutely are.

Pray, read the Bible, go outside, take a nap, then reset. Begin a brainstorming session. Consider all ideas, even bad ones, and just let the ideas flow.

Business exists because problems exist and people come up with solutions that have value. Let problems be your signposts. Look for an opportunity to serve.

• Help seniors with grocery shopping or errands.
• Offer pet care, boarding, or dog walking.
• Tutor online or help someone with a skill you already have.
• Provide fulfillment services, such as boxing and shipping, for another home-based business.
• Edit videos or handle calls for a business owner who needs help.
• Bring people's trash cans up to their house, clean the cans, or mow lawns.
• Make crafts, sell home-baked goods where allowed, or grow flowers and produce to sell.

Go to Fiverr or Upwork and see what services people are offering. Tweak it. Is there something they're doing for the masses that you could do for people right here in your neighborhood?

Ask people who are working what they need help with. Look at what people complain about in neighborhood groups. Once in a while you will find a gold nugget.

Selling possessions can help with an immediate shortage, too. Just remember that you can only sell the same thing once. An ongoing monthly shortfall needs an ongoing solution.

Compare the whole cost before you move

Buying a smaller house is an obvious option. Hard times call for hard decisions.

Before you decide a different house will be cheaper, compare the full payment and the other expenses. A lower price can still come with a higher interest rate, more repairs, or expensive dues.

Look at these options:

• A different county or school district with a lower tax burden for your situation.
• A home outside city limits that isn't subject to city property tax.
• A neighborhood without an HOA.
• A property without a PID assessment. A PID is a public improvement district, and its assessments can add to your costs.
• A home that costs less to heat, cool, maintain, and insure.

Compare the actual tax bill, special assessments, insurance quotes, utilities, and commute. Rural property still has taxes and expenses. You want to know what you'll be paying after the move.

Sometimes the option is a bigger house

Buy bigger so you can rent out rooms. Buy a house with a garage apartment and rent out the apartment. Share a home with family and share the expenses.

Those are all ideas to consider, even if buying a bigger house sounds backward when you're trying to spend less.

Another possibility is renting out your current house and moving somewhere less expensive. Run the numbers with an allowance for repairs, vacancy, insurance, and any change in your tax exemptions. You need enough left over for this to help.

Be careful about taking on a payment you can only afford when every room is rented and nothing breaks.

Consider a different kind of housing

Renting is an option. You could move in with a friend or family member, buy a condo or townhouse, or consider a barndominium, tiny house, or manufactured home.

Living in an RV sounds crazy to some people, but I've sold houses for people making that change. Shipping container homes and buying land where you can raise animals or crops are other ideas I've put on the list.

These take homework. Land, utilities, site preparation, financing, and maintenance can change the math quickly. Get the full cost before deciding any of them will be cheaper.

Would it help to have a list of rent houses and apartments in the area that fit your price range? Would you like to know what you could sell your house for and how much you would have left after the sale? We can help you work through those questions.

If you're already at the point of missing a payment, call your mortgage company and ask about hardship assistance. Find out what options are available before the situation gets further along.

You don't have to figure out every possibility today. Start with your statement, make the calls, and find out which of these options are available to you.

Have more ideas? We want to share them. Please email them to me at chandler@chandlercrouch.net. If something on this list works for you, I'd like to hear that, too. It will help me help others.

 

Written by Chandler Crouch 
Broker/Owner at Chandler Crouch Realtors
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