Mortgage Payment

Mortgage Payment BREAKDOWN Principal Interest Property

Taxes

Principal payments are used to repay your loan to the lender. The principal portion of your payment reduces the owed amount (principal balance) of your loan each month. The lender charges interest daily based on your interest rate reflected on the loan note at closing. The amount of interest you pay over the life of the loan is based on the interest rate and the time is takes to repay the principal balance. State and local governments impose property taxes on real estate owned. If your mortgage loan includes an escrow account, 1/12 of your annual property tax liability is paid each month as part of your payment. This amount goes into your escrow account to pay the property tax bill each year. Lenders require homeowners insurance on every mortgage loan. The dwelling coverage must equal the loan amount or include full replacement costs. As a buyer, you choose your insurance agent and any additional coverage amounts. Your loan officer will estimate an amount at the time of application. This amount is changed to match your agent’s premium invoice at closing. If you escrow homeowners insurance, 1/12 of your annual homeowners insurance is paid each month as part of your payment. This amount goes into your escrow account to pay your homeowners insurance premium each year.

Homeowner' s Insurance Mortgage Insurance

Unless you put 20% down on the purchase of your home, the lender requires mortgage insurance. This is an insurance policy for the lender to reduce their risk in the case of loan default. Mortgage insurance premiums are based on down payment amounts and credit scores on Conventional Financing. Upfront & monthly mortgage insurance and guarantee fees on government loans are based on a set percentage regardless of credit score and down payment amounts. With 20% down payment, conventional financing does not require mortgage insurance nor an escrow account.