A mortgage payment is a monthly payment that generally consists of 4 parts:
- Principal & Interest – This is the portion of the payment that goes towards the loan balance plus the interest you pay as a cost of financing.
- Escrow* – Taxes & Insurance
- Taxes – This is the portion of the payment that goes towards your annual county tax bill.
- Homeowners Insurance – This portion of the payment goes towards the annual premium of your homeowners insurance policy. If your home is located in a flood zone you may also be required to carry Flood Insurance as a separate policy which can also be a part of your monthly payment
- Private Mortgage Insurance** or PMI – This is a premium paid to cover the lender in case of a default on the loan. Generally it is required on any home loans with than a 20% Down Payment for a new purchase and more than 80% Loan to Value on Refinance Loans
*Escrow can be waived when putting 20% or more Down Payment when purchasing a home.
** Private Mortgage Insurance can be removed from your loan payment 2 different ways after purchase.
- When your loan naturally reaches 78% Loan to Value (LTV) with Conventional Loans or upon request at 80% Loan to Value (LTV)
- You can refinance your original loan to remove Mortgage Insurance. To Learn More (Link) about how to remove Mortgage Insurance by Refinancing your loan click here.