In the world of mortgages, you may wonder what exactly your mortgage payment will include, and this is a good thing to consider if you are preparing to buy a house. Knowing and understanding the way mortgage structures work will help you choose a house you can afford. One important term to understand with this is called PITI. PITI stands for principal, interest, taxes, and insurance, and this is the basic structure of a mortgage.
Principal
One of the components of a mortgage payment is designed for something called principal. Principal is a word that describes the balance you owe on the loan and the amount you pay each month towards your balance. When you initially take out a loan, the amount applied towards the principal will not be a lot, but the principal amount will increase slightly each month. In the last couple of years that you are making payments, the money you pay will primarily go towards the principal.
Interest
The largest part of your mortgage payments at first will go towards the interest you must pay on the loan. Interest is money you pay in exchange for getting a loan. This is the money the bank makes off your loan, and the interest amount will be a lot at first, but it will go down as the principal balance decreases.
Taxes
Part of your mortgage payment will also be applied for the property taxes you must pay on your home. Property taxes can vary in amount, but most lenders require that you pay for this on a monthly basis. When you do this, they will put the money in an escrow account and will save it up all year long. When your property tax bill is due, your lender will pay this bill for you from the money they have collected from you during the year.
Insurance
The other main thing you will pay with your mortgage payment is for homeowners insurance. You will likely have to pay this on a monthly basis, and it works the same way as the property taxes. You pay monthly and your lender pays the premiums when the insurance company issues the bill saying that it is due.
These are the four main things your mortgage payments will include; however, you may have an additional expense added in for private mortgage insurance (PMI). If you have questions about getting a mortgage or want to apply for one, talk to a mortgage lender today.
Hello, my name is Sigmond Jenner. Welcome. I am here to talk to you all about acquiring personal loans for emergency expenses. Although everyone should have an emergency fund in a savings account, there are many barriers to achieving that goal. In the meantime, you can look into acquiring a loan to cover emergency expenses that may come up. You should be prepared ahead of time, so you can act fast when unexpected financial expenses arise. I will provide information you can use to prepare yourself for this process. Please come back again anytime to learn more about acquiring loans as needed.