Have you wondered what makes up a mortgage payment? How do you calculate a monthly mortgage payment? Keep reading or watch the video below to go through the main parts of a mortgage payment and see a few examples.
There are four main parts that make up a mortgage payment. The principal is the amount borrowed or the amount financed. Interest is the amount charged by the bank or mortgage company for loaning the money. Taxes are the real estate taxes assessed by the County and possibly City if the property is in an incorporated area. Insurance also called home owner’s insurance or hazard insurance is the fee for covering the structure of the home in case of theft, fire, hail, vandalism and other hazards. This amount will vary based on the coverage and the deductible. These four parts are usually referred to by the acronym PITI. It is possible to have additional charges that make up a mortgage payment such as flood insurance if the property is in a FEMA flood zone or Private Mortgage Insurance if you have a small down payment and/or the lender deems you to be a higher risk. If the property is part of a Home Owners Association there is probably an HOA payment required either monthly, quarterly or annually. This HOA payment is typically not part of the mortgage payment. However, the bank or mortgage company does consider the HOA payment when calculating your debt to income ratio to determine if they will approve the mortgage loan.
Need more info about mortgages? I can put you in touch with a great lender. Just let me know what questions you have and the best way to reach you.
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