Payments
Your payment is made up of several parts:
Interest - This is what you pay to borrow
the money. The lower the interest rate, the less interest you pay.
Your loan payment will always have an interest component.
Principal - This is the part of your
payment that pays back the money you have borrowed. It is the debt
you owe. Most mortgage calculators will compute the
principal plus interest for a given term and interest rate.
Insurance - When you get a mortgage, you
must have home owner's insurance. Usually the mortgage
company will pay this in your behalf, and include it as part of
your monthly payment. You can lower your monthly payment by
shopping for lower cost insurance. If you put less than 20% down
payment, many lenders will require you to pay PMI insurance to
protect them in case you do not make your payments. Some lenders
have programs for low interest rates and no PMI. Ask us about
these programs.
Taxes - Most mortgage companies
require that they pay the real estate taxes for you. The taxes
will then be part of your monthly payment. For the mortgage
company to pay the taxes and insurance once or twice a year when
due, they take take monthly installments as part of your payment. The money held for this purpose is held
"in escrow".
Association dues - If you buy a condo or
are part of a formal neighborhood association, you will be
required to pay monthly association dues. Many lenders require
that the dues be paid as part of your monthly payment.
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