What Are the Basic Parts of a Standard Mortgage Payment?
Posted by Bob Blick in Mortgage LoansIf you are looking at the prospect of buying your first home, you may be experiencing different emotions from excitement to apprehension. It is understandable when you begin to consider how enormous an investment—and a risk—it is to buy a house.
Let’s take a look at the four major parts of the standard monthly payment.
• Principal
Your principal is amount of money you plan to borrow from the lending institution once a down payment has been made. It is the financing you have received, and ultimately what you will need to pay off to be finished with your loan.
• Interest
As with any type of loan, there is interest involved. Lenders will attach an amount to your monthly payments that is a percentage of the total principal. This is your interest.
• Taxes
Besides interest and the principal, your payment may include the amount of your property taxes. Many lenders will use an escrow account to manage the money that will need to be paid in order to keep all taxes current.
• Insurance
The typical mortgage payment will include at least one of the following forms of insurance: hazard insurance, flood insurance, and private mortgage insurance.
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