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4 Parts of a Mortgage Loan

by Kevin Smith Author

When 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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About Kevin Smith Senior   Author

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Joined APSense since, December 7th, 2016, From Utah, United States.

Created on Apr 20th 2020 01:55. Viewed 300 times.

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