Blog Layout
Understanding the Components of Your Monthly Mortgage Payment
Ken Venick • Jan 29, 2021
Buying a home is one of the most expensive purchases you’ll make in your lifetime. And paying off that mortgage is a commitment you need to be financially prepared for.
Mortgages are complicated, and most people don’t fully understand how it’s calculated and what it’s made up of. Monthly payments are made up of four key components: principal, interest, taxes, and insurance. In this article, we’ll take a deeper dive into the makeup of a monthly mortgage payment, so you can understand how much you’re paying and why.
What’s included in a monthly mortgage payment?
- Principal. This is the amount of money you borrow from your lender to purchase a house. This is calculated by subtracting your down payment from your home’s final selling price. Principal is the most important factor when deciding how much you can afford, because it starts collecting interest as soon as it’s taken out. In addition, you’re also responsible for any repairs , maintenance, taxes, insurance, etc.
- Interest. Interest is the money you pay to the mortgage lender in exchange for giving you the loan. Interest is typically calculated by looking at an annual percentage rate (APR). This is the amount of interest you’ll have to pay on your loan per year. Interest is tricky, because even a few percentage points can dramatically shift how much you eventually end up paying for the loan. The percentage of interest paid on a loan is determined by factors like credit score, location of your home, price of down payment, etc. It’s important to note that all lenders are different, so make sure you do your research.
- Taxes. As always, taxes are inevitable. And no matter where you live, you need to pay them. Property taxes help fund public places like schools, fire departments, construction, etc. This is often something that homeowners overlook, but can end up being the most expensive. These taxes are determined by looking at the value of your home and what the amenities in your local community look like. The amount can change each year, and oftentimes the county will require you to get a new appraisal every couple of years. Based on tax authority requirements, tax assessors can adjust the rate by evaluating the value of your property.
- Insurance. While having homeowners insurance isn’t required to own a home, it’s certainly encouraged. In fact, many mortgage lenders won’t give out a loan unless you have it. Homeowner’s insurance is important because it protects you in the chance that an unfortunate event happens, such as flooding or a fire. If you have specific items in your home you want to protect, you should think about buying a rider policy. It’s essentially an extra statement in your homeowner ’s policy that makes sure your coverage is extended to protect those items. Homeowner’s insurance is decided based on a few factors, including your home’s location, value, what kind of area you live in (urban, rural, etc), and how close you are to safety stations like fire departments and police stations. All of this can vary by state as well.
Need additional help understanding your monthly mortgage payment? Ken Venick would love to help! With over 30 years in the business, he can point you in the right direction for you or your client’s needs. Visit our home page to learn about the various mortgage services we can provide, and don’t hesitate to contact us today.
The post Understanding the Components of Your Monthly Mortgage Payment
appeared first on Owings Mills & Lutherville Mortgage.
The post Understanding the Components of Your Monthly Mortgage Payment appeared first on Owings Mills & Lutherville Mortgage.
Buying a home can be very intimidating and the no strings attached feeling renting can give someone sometimes seems like the easier option. But that isn’t always the case. There are many situations where it makes more sense to purchase your home instead of continuing to rent it year after year. There are alot of […]
The post The Benefits of Buying A Home Over Renting appeared first on Owings Mills & Lutherville Mortgage.
Due to the pandemic, there have been a lot of people purchasing homes or even refinancing. It is important to understand the different types of loans that are offered to make sure the buyer knows their options. Ken Venick has been in the mortgage loan business for over 30 years and is your […]
The post Learning and Understanding The Different Types of Loans appeared first on Owings Mills & Lutherville Mortgage.
Find yourself wondering what a mortgage broker is? A mortgage broker acts as an intermediary between the borrower and the lender and controls transactions between the two. They take care of finding the best mortgages and interest rates by using their personal network of financial institutions and lenders. Working with a mortgage broker is […]
The post Understanding What A Mortgage Broker Does appeared first on Owings Mills & Lutherville Mortgage.
Just bought a fixer upper that needs a lot of work? A home renovation loan gives the homeowner the funds needed to not only purchase the home, but fix it up as well. A home renovation loan should only be considered if the renovation of the home will increase the property value or reduce long-term […]
The post What is a Renovation Loan? appeared first on Owings Mills & Lutherville Mortgage.
Congratulations, you are looking to buy a new home! This is such an exciting time in your life, but it can also be an expensive one. When it comes to buying a home there will be plenty of hidden expenses you may not have taken into account when you decided to become a homeowner. It […]
The post Hidden Expenses When Buying A Home appeared first on Owings Mills & Lutherville Mortgage.
The home buying process starts with figuring out the location of where you want to live. This can be extremely overwhelming with a lot of different scenarios to think about and a lot of decisions to make. Here at Ken Venick, we want to make the home buying process as easy as possible and that […]
The post 5 Important Tips A Homeowner Should Know When Narrowing Down An Area To Live In appeared first on Owings Mills & Lutherville Mortgage.
On the road to buying a new home? Is your lender requiring you to have a co-signer in order to get your loan? We break down the requirements of a co-signer to give you a better understanding as to why you may need one in the first place. A co-signer is someone (like […]
The post Why Is Your Lender Requiring You To Have A Co-Signer? appeared first on Owings Mills & Lutherville Mortgage.
The Federal Reserve has said it will keep it’s interest rates close to zero, but it wont stay this way for long. Homeowners have been quick to put their houses on the market since more and more buyers are on the prowl are on the hunt for a new place to call home. […]
The post Money Moves To Make When Your Interest Rates Are Low appeared first on Owings Mills & Lutherville Mortgage.
Home renovations are one of the hottest topics in 2021. It gives an owner the chance to turn their space into exactly what they need it to be, whether they have just moved in, making more room, or getting ready to put it on the market. Home renovations can increase the value of a home […]
The post 5 Home Renovations With The Highest and Lowest Returns appeared first on Owings Mills & Lutherville Mortgage.
It may take weeks, months, or even years to find your dream home. And one you find it, you want to do everything you can to secure it. There’s always the fear that someone else can snatch it up — which means you need to seal the deal with a competitive offer! In this […]
The post Top Ways To Show A Seller Your Offer Is Legit appeared first on Owings Mills & Lutherville Mortgage.
Are You Ready to Get the Ball Rolling on Your Mortgage?
Get in Touch With a Mortgage Expert
NMLS# 150953
© 2024 All Rights Reserved | Luminate Home Loans, Inc.