It is important to understand details of MA monthly mortgage payments for budgeting purposes. The acronym PITI is often used to represent the items included, which are principal, interest, taxes, and insurance. Not all loan payments will include every one of these items. It will differ based on your specific loan.
Details Of Monthly Mortgage Payments
Paying Down Principal
Principal is essentially the balance of the mortgage. For a typical loan, a portion of the mortgage payment every month is allocated towards reducing the balance, although there can be exceptions to this such as interest only loans. In the first several years of making payments, very little of the payment will go towards principal, but this increases over time.
Interest is the fee charged by mortgage companies for use of their money. The interest rate is generally a yearly figure but charged monthly according to the balance of a loan. Based on your loan program, the interest rate will remain the same for the entire term of the mortgage or it may change at specific time frames.
Taxes are levied by MA based on the assessed value of a home. The total is calculated annually but traditionally due quarterly or twice a year. Overdue property taxes become a lien on a property and take priority over mortgage liens. Many mortgage companies will, as a result, require homeowners to put aside money into an escrow account to ensure that there are enough funds for the bills when they are due. Those funds are collected in monthly increments by the lender as part of the regular mortgage payment. The lender then pays the taxes directly rather than relying on the homeowner to do so. It is a means of protecting their interests in a property.
There are two types of insurance for a home. Property is generally required whereas mortgage insurance varies based on the specific program. Both can be part of recurring mortgage payments.
Property insurance covers damages. Lenders mandate this insurance since the home is collateral on the loan. Insurance premiums are due annually and many will require funds be put into escrow (similar to tax escrow). They will then pay the premiums directly to make sure the policy does not lapse.
Mortgage insurance is common for mortgages higher than eighty percent of the property value or sale price. It protects the lender should a borrower fail to make payments. Lenders estimate that they will not recover the full amount owed if it forecloses, so the mortgage insurance covers some of their loss. Even though it benefits the lender, it is charged to the borrower.
Understanding MA Monthly Mortgage Payments
Not all financing is structured the same and therefore not all MA monthly mortgage payments will contain all of the above items. There may be additional monthly expenses such as condo fees, which are not collected by mortgage companies but are a significant factor in estimating total monthly housing cost. Keep in mind that exact figures are based on a specific home and interest rate, so any preliminary figures will likely fluctuate.For an estimate of your possible loan payments, contact , John Wells at Century 21 Wellsco .