Bills can be a pain. Especially when it feels like more money is leaving your pocket than finding its way into your pocket. The worst is when you don't even know where your money is going. You just know that you have a bill that says you need to pay, so you pay it.
If you're like me, an itemized list is always nice to have so that I can see where my money is ending up. Sometimes, it can be frustrating, but at least I know that it's going to an area that helps make my life a bit easier.
Where does your money go when it comes to paying a mortgage?
Professionals in the housing industry refer to these area's as PITI. PITI is an acronym for Principal, Interest, Taxes, and Insurance.
Principal is the amount of your payment that is applied to the balance of your loan.
Interest is a percentage rate that is agreed upon at the time a borrower goes through the mortgage process. Depending on the loan product that the borrower chooses, the interest rate can remain "fixed" throughout the life of the loan, or it can fluctuate. Rates will change based off of the supply and demand of credit in the market. The higher the demand, the higher the rate. It's important to get locked into a rate that is affordable as it becomes an added expense on top of the principal payment.
Taxes are a borrowers property expenses that need to be paid each month. This is reassessed each year, and the borrower will pay 1/12 of that yearly amount each month. The money paid will go towards things such as first responder services, recreation centers, schools, and general upkeep of roads in the area.
Lastly, Insurance. Homeowners insurance is required when the purchase of a home occurs. This will protect the borrower in case of a fire, broken pipes or other accidents that may occur at, or in your home. It is mandatory that the home remains insured and that the borrowers make their payments each month.
At closing, the borrower will receive what is called an "amortization schedule". This schedule will list out each monthly payment, and show a road map of what the borrower can expect to pay between principal and interest from the first month of living in the home, until the mortgage is completely paid off.
Hopefully this helps give you an overall idea of what is included in a monthly mortgage payment. If you have any more questions, please feel free to reach out to me and lets chat about the details of your mortgage.
*disclaimer: Not all individuals will qualify for each loan type and/or scenario. Please contact me to see if you'd qualify for these loan products and/or discuss your options.
Brayden Ramsay NMLS #1997195
Momentum Loans NMLS #1606597
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