Are you planning to buy a house? Are you ready to manage monthly mortgage payments? You must know about the monthly mortgage payments and how much can be afforded by you. So, know that why you are paying and for how long you have to pay mortgage loans.
Components of Monthly mortgage payment?
- Principal- The primary component of the mortgage payment is principal. It is the original amount of money that is borrowed from the lender for buying the house.
- Interest- The lenders give you money so that they can make money on the borrowed amount. Interest is the percentage of the original amount of the loan. The mortgage interest rates keep on changing. So, select a mortgage loan with a fixed interest rate that has to be paid monthly.
- Tax- When you buy the house then you have to pay a certain amount of tax to the local government that is known as property tax. The property taxes pay for police, firefighters, schools, public services, and roads.
- Insurance- Every person that buys the house requires home insurance. It is an important thing that pays money for rebuilding or repairing the home after a tornado or fire. The insurance takes the stress from your shoulder and gives it to the insurance companies.
When to pay property taxes?
The local government charges property taxes annually. However, you can pay them as a part of the monthly mortgage payment. You have to pay the property tax monthly. The lender saves this amount in a separate account known as escrow. At the end of the month, the escrow company will pay all the money as the property tax.
How are property taxes calculated?
Many people get confused that how property taxes are calculated. The property taxes are assessed value rather than market value. The market value is the price that is agreed upon for your house. The assessed value is set by the assessor of the property who looks at the house and tells the local government the worth of the house.
When to pay for the home insurance?
Do you remember that the property taxes get collected in the escrow account monthly? At the end of the year, the whole amount is collected by the local government. Similarly, the house owners give a part of the insurance on top of interest payment and principal amount monthly. This insurance amount gets collected in the escrow account. At the end of the year, the insurance company will take away all the money as a part of the due insurance payment.
How much insurance has to be paid?
The amount of home insurance is based on the amount of insurance to be bought. If you are facing any problem in deciding the right insurance for your home then you can take the advice of an insurance agent. They will help to get the best price.
Other fees in the monthly mortgage payment
You are required to pay other related fees such as private mortgage insurance or homeowner’s association fees.
- Private Mortgage insurance- It helps to protect the lender from you.
- Homeowner’s association fees- It helps to manage the property and shared services or facilities as private residential commodities such as townhouses, condos, and gated communities.
Buy home mortgage loans that can be afforded by you
There are various kinds of mortgage loans that charge different monthly premiums. You must look at the total cost for building valuable wealth. If you need help in selecting the right loans for your home then you can contact a professional. You can also take the recommendation of your friends and family members.
