What Makes Up a Mortgage Payment?

Whether you are thinking about your first home purchase, or you are an existing borrower, you might be pondering “Wait…what exactly does my mortgage payment go towards?” Fret no further, my friend. We’re outlining the 4 main factors that comprise your monthly mortgage payment. 

Let’s talk about PITI. And no, I’m not talking about regrets or misfortunes, silly! The acronym P-I-T-I.

#1- P – Principal.

 For the first several years of your loan repayment, it’s normal for less of your payment to go towards principal and more towards interest…but don’t worry! A significantly larger amount goes towards the principal repayment as your loan ages! Pro tip: You can shrink your loan faster by making additional payments to the principal balance. Check out 4 Hacks to Pay Your Mortgage Off Early to learn more.

#2-I – Interest.

Your interest rate is essentially the lender’s compensation for allowing you to use their money to purchase your property. Interest rates can fluctuate depending on larger economic factors and investment activity, so connect with a Homespire Mortgage loan expert to learn more about current rates.

#3- T – Taxes.

Property taxes are often paid annually on behalf of your lender. The cost is divided into 12 installments that are collected from your monthly mortgage payment and held in an escrow account for your convenience. How much you owe depends on several factors, such as your city tax rate and the property value itself. 

#4- I – Insurance.

And finally homeowners insurance and mortgage insurance, if applicable. Homeowners insurance protects your property in the event of damage or theft and mortgage insurance protects your lender. As with taxes, your lender will typically collect your payment in 12 monthly installments and pay your insurance bills when they are due! 

And that’s it! Visit www.homespiremortgage.com to connect with a Homespire Loan Officer to get personalized service and to learn more about loan options and payment questions!