4 Parts of a Mortgage Loan
by Kevin Smith AuthorWhen you apply for a home mortgage loan, you’ll be quoted a certain
amount. However, this usually isn’t the total amount that you’ll be paying.
It’s important to know how much you’ll be paying in total each month so that
you can be assured that you can afford the payments. There are four different
types of payments that will go into the total amount of your loan. Here are the
four parts of a mortgage payment when you receive a home mortgage loan quote in
Fairfax, VA.
Principal
The principal payment is the amount of money that will go directly into
the balance owed. While mortgage companies want to make money by offering
loans, that won’t come from the amount of the principal. When the loan is
entirely paid off, the amount that you pay for the principal will match exactly
with the amount that you were loaned in the beginning. This usually makes up
most of your monthly payment. That’s a good thing because it means that most of
what you’re paying is going into paying back the loan as opposed to other fees.
Interest
When you receive a loan of any type, there will be a certain amount paid
in interest. This is a fee for borrowing the money in the first place.
Companies that loan money need to make money in some way or they would go out
of business. Interest payments are how they make that money. The amount that
you’ll pay in interest largely depends on the economy but can also depend on
your financial situation. For example, if you have poor credit, you might have
to pay more in interest. This will protect the lender in case you can’t afford
the payments at some point.
Taxes
When you receive a loan from a lender, they legally own your property
until you pay off the loan. There are certain state and federal taxes that will
need to be paid to the lender since you’re living on the property. These taxes
would be paid regardless, it’s just that you’re paying the lender rather than
the government. The amount that you’ll be paying in taxes each month is easy to
determine. Simply learn how much your property taxes are for a calendar year
and divide them by 12. This is the amount in taxes that you’ll be paying each
month.
Insurance
Insurance protects you and the lender should a disaster occur that
results in a total loss. This will allow the home to be rebuilt in the exact
same way. Some of the factors that go into determining the premiums for
insurance include the age of the home, its location, materials, and its size.
The total amount of insurance is calculated annually so you can divide this
number by 12 to determine the amount you’ll pay in insurance each month.
When you receive a home mortgage loan, there are four different aspects that will make up your total monthly payments. Understanding these will help you determine the total amount that you’ll need to pay. These are the four aspects that make up a home mortgage loan quote in Fairfax, VA.
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Created on Apr 20th 2020 01:55. Viewed 300 times.