A Monthly Mortgage Dissected via @homebidz

A Monthly Mortgage Dissected

Before you start your home search, you need to take some time to get acquainted with your projected monthly mortgage. Learn what makes up a mortgage and be sure that you understand all the parts before you start in on searching for the right home.

Understanding Principal

The principal is first on the list. This is basically the entire amount of the actual loan. This amount will not include any of the taxes or interest on the loan. Making higher payments on your principal amount can greatly reduce the total balance of the loan.

Interest Charges

Interest may seem like a big amount once you add it up, but you can think of this as being what the lender will actually charge as the cost of providing the loan. Interest rates can vary depending on the lender so you may need to shop around to find the best rates.

Insurance Charges

Insurance makes up another part of your mortgage payment. This is classified as either homeowner insurance or hazard insurance. It basically covers the home in case of problems such as damages from fire, wind, or flooding. Usually, an escrow account is set up in order to make this payment.


Like home insurance, an escrow account is usually how this payment is made. These are really property taxes and the local government is usually the one that will charge the necessary balance. This money comes directly from the mortgage payment but will be held in the escrow account.

As you can see, there are many aspects of your monthly mortgage. Once you understand each one, you will feel confident in budgeting your house payment each month. It's important to keep these other charges in mind when you are figuring out your house payments, as they will not always be added on automatically. Check with your lender for a final monthly amount so you won't be surprised when you start making your mortgage payments.

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