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When you found your dream home, you used an online mortgage calculator to determine what your monthly payments would be.  You may be surprised to know that your mortgage payment is not only the money you owe for buying your home. It actually includes several other payments that must be made on a monthly basis, thereby increasing your monthly mortgage payment.

What’s included in a monthly mortgage payment?housecalc

Principal – A portion of the money you borrowed to buy your home is due each month. Depending on the structure of your loan, your principal amount will increase each time you make a payment.

Interest – The mortgage lender will charge you interest. The amount of interest you pay each month decreases the same amount that the principal increases, keeping the Principal and Interest portion of your mortgage payment the same from month to month.

Real Estate Taxes – When the mortgage lender owns most of your home, they will pay the real estate taxes from your escrow. Each monthly payment will include 1/12 of your total real estate tax bill. The mortgage lender will ensure that the payment is made each month.

Insurance – When the mortgage lender owns most of your home, they will require that you maintain a homeowner’s insurance policy to protect their interest. Each monthly mortgage payment will include 1/12 of the total annual insurance cost and the mortgage lender will ensure that payment is made each month.

Private Mortgage Insurance – Buying a home with a smaller downpayment creates a greater risk for the lender. To compensate for that risk, the lender will require that you pay Private Mortgage Insurance. This will increase your monthly mortgage payment.

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