Your Monthly Payment

Once you decide the type of mortgage that best suits your needs, you’ll want to determine how much you want to spend on your monthly payment. A mortgage payment includes four parts: Principal, Interest, Taxes, and Insurance.

Principal:

The amount that you pay each month that goes towards the original amount of loan (the money you’ve borrowed) over the course of your term (15 years, 30 years, etc.)

Interest:

In addition to the principal payment, borrowers are also charged an additional amount of money each month that goes toward interest (the cost of borrowing the money.)

Taxes:

Each year, county assessors will determine the value of your home, which will affect how much money you will pay in property tax. The property tax is usually based on the property location and how much it’s worth. Property taxes are one of the most important considerations when choosing a location for your home. High tax rates can have a significant impact on your monthly mortgage payments. Including your property tax savings can be either optional or required based on the requirements sent by your lender. This is called an Escrow account.

Insurance:

Depending on the size of your down payment and the type of mortgage you take out, you may be required to pay mortgage insurance. Your lender may also require you to carry homeowners insurance.