When you’re thinking of buying a home, you may wonder what your mortgage payment will look like. When you have a mortgage, you’ll have
several different portions of your payment each month.
Your mortgage payment consists of principal, interest, taxes and insurance (often abbreviated as “PITI“), and sometimes additional
fees, such as homeowners association dues. Back to home buyer and seller tips
What is PITI?
Principal – is the money you borrowed to purchase the home. Every month you will pay a portion of the principal and eventually you will pay off the entire amount. Usually in 15 or 30 years. The way most loans work is that over the years the monthly payment starts with paying more of the interest and less of the principal…..over time each payment pays more principal and less interest
Interest – is the cost of borrowing money.
Taxes – are paid by homeowners to local governments, and are usually a percentage of the assessed property value.
Insurance – helps protect against financial loss from fire, natural disasters or other hazards. Most lenders require you to have a homeowner’s insurance policy on your home because it will help protect their investment as well as yours.
Remember, many loan quotes will only include your principal and interest. You’ll also need to factor in the taxes and insurance to calculate your total monthly mortgage payment.
When you’re ready to take the next step to buying your home, please email me, or give me a call. I’ll be happy to explain the process further
and help you narrow your home search.