Uncategorized November 22, 2022

What’s Included in My Mortgage?

The vast majority of home buyers need financing to help fund the purchase of a new home. But what does
​​​​​​​a mortgage payment include? Here’s a breakdown of where your money goes with each mortgage payment.

Principal: The largest percentage of your mortgage payment goes toward the principal, which refers to the total amount you borrowed to buy your house or the amount you have not yet repaid. With most loans, the percentage of your mortgage that goes toward the principal will increase over time because lenders like to collect more interest early on to help minimize the financial risk of a potential loan default.

Interest: A segment of your monthly mortgage payment will always go toward interest, which is essentially the cost you pay to borrow money from a lender. Lenders assess interest rates based on perceived risk,
so it’s important to make sure your credit and finances are strong when applying for a mortgage loan.

Other expenses: In addition to principal and interest, mortgage loans also pay for real estate taxes, homeowners insurance and, if applicable, private mortgage insurance (PMI). You may also be responsible
for HOA fees if your community is governed by a homeowner’s association.


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