Home Blog This is How Your Monthly Mortgage Payments Are Broken Down

This is How Your Monthly Mortgage Payments Are Broken Down via @homebidz

This is How Your Monthly Mortgage Payments Are Broken Down

Click Here to Browse FHA Loans

Getting a mortgage can be stressful, especially if you are a first time home buyer. What can be even more stressful is not having a full understanding of your monthly mortgage payments. Many home buyers are not aware of the differences in principal and interest payments.


What is Principal?

When a home loan refers to the principal, it is referring to the actual amount of the loan that does not include any interest or any other fees associated with it. If you were to make specific principal payments, you would only be paying on the full loan amount, minus fees and interest. When you have either an adjustable rate loan or a fixed rate loan, you can have two different outcomes. Adjustable-rate loans means that the principal payments can go up or down throughout the life of the loan. Fixed-rate loans means that the principal itself will not change, but other parts of your loan still can.

What is Interest?

Interest Rates are a bit different from principal payments. Interest is merely what the lender is charging you for providing the loan to you. Sometimes it can be very beneficial to make certain payments early on for a home loan because it can bring down the interest rate. Paying points is one way that you can help to bring down your interest rates continually. Also, know that every lender will have a different method and can offer different rates to you. This is why it is a good idea to shop around before settling on any one lender for providing you with a home loan.

Final Thoughts

You need to know where your money is going to make the most of your home investment. Principal is the amount of your money actually going into the house, and interest is the payment you're making to your lender for their services. Now that you know, you can understand why some people make payments above the agreed upon amount of their monthly mortgage payments -- all extra money will go toward the principal balance, not the banker's pockets.

Click Here to Browse FHA Loans

Latest Posts

The Art of Changing Realtors When You Need to via @homebidz

The Art of Changing Realtors When You Need to

First Time Home Buyers Click Here Finding a realtor can be kind of like dating. There are a ton of them, each with their own set of pros and cons, different areas of expertise, etc. So, when you start forming a...
Loans, Fees, and the Real Cost of Owning Your Home via @homebidz

Loans, Fees, and the Real Cost of Owning Your Home

Need a Home Loan? We know this may come as a shock, but that home that’s for sale for $350,000 will actually end up costing about $575,000 over time. How? Between the interest rates, insurance, property tax, and...
Rent to Own vs. Traditional Mortgages via @homebidz

Rent to Own vs. Traditional Mortgages

Need an FHA Loan? It’s no secret that most people seek out rent-to-own home options over traditional mortgages because of credit issues: either their credit is fair or poor or simply just unestablished. Depending...
Why Does My Credit Matter? via @homebidz

Why Does My Credit Matter?

Click Here to Look at Bad Credit Home Loans Honestly, if you have less than perfect credit, you can still potentially buy under a rent to own option, but you still have to get financing at some point, so you'll need to...
Taking the First Step on Your Rent to Own Journey via @homebidz

Taking the First Step on Your Rent to Own Journey

Looking for Rent to Own? When considering a rent to own journey, there certainly are a couple different choices. Each requires the rental property itself, two authorized documents, and then -- sometimes -- an...
Simple Ways to Save for Your Down Payment via @homebidz

Simple Ways to Save for Your Down Payment

Need Family Support? There are a lot of different ways to purchase a home. You can get creative and try owner-financing, or even buying a home at an auction. For the majority of us though, we’re still using banks and...

Categories

Things To Know