Why do I owe more on my house today than when I bought it if I have been paying my mortgage for 4 years?

UPDATED: Sep 30, 2022

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Why do I owe more on my house today than when I bought it if I have been paying my mortgage for 4 years?

I recently looked in to selling my house because I cannot afford to the mortgage anymore. I bought the home 3 years ago for $228,000. When I called the lender to ask for the payoff they told me it was $233,000. I did fall behind last year about 3 months but made arrangements for a modification on the loan. The terms of the modification were – make 3 payments of $1775 which I did in August, September and October. I did not receive the final modification documents until May, I signed and returned them and still haven’t received anything stating that it was approved or what my new payment is going to be. And now they are telling me that I owe $233,000 and am negative in my escrow balance. How is this possible?

Asked on June 7, 2017 under Real Estate Law, Texas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

It is impossible to answer your question without reviewing the mortgage (includiding modification) documents. There are several possibilities, such as (for example):
1) When you did the modification, it is common for there to be various fees or costs associated with it--if there were, they may have been added to your principal.
2) When you bought the house, were there any "points" (such as for rate lock, loan origination fee, etc.) which were added to the balance?
3) What kind of a loan was it? While unusual, there are "negative amortization" loans where the payments you make are artificially low for several years and do not even keep up with the interest, so that the principal keeps growing for a few years before payments increase and start paying it down.
You should bring all loan documents and records of all payments to an accountant to review with you, to understand why you owe so much. If it turns out that is an error (or worse: a deliberate attempt to defraud you) and the lender will not voluntarily correct it, you may be able to sue them for compensation.

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