What's Included in a Monthly Mortgage Payment?

If you thought the only number you needed to calculate before buying a house was your down payment, think again. Though the down payment is a vital element in the sale, and often one that many first-time homebuyers place the most focus on, it's essential not to neglect the other significant expense following this transaction: your monthly mortgage payment. If you're buying a house via a mortgage loan, you should be aware that your monthly payment includes much more than just the remainder of the loan cost. Here are a few of the other items which are included in a monthly mortgage payment:

• Principal
  The principal is the amount that goes directly towards paying down the loan amount. It reduces your total amount owed on the house. It's often a small part of your overall monthly mortgage payment, as other fees will make up a sizeable portion of the full cost.
• Interest
  Interest is one of those additional costs. The interest payment is determined by the specific rate that you receive when contracting the loan. The total interest owed to the lender is stretched out through your entire mortgage. Thankfully, as you continue to make payments, your interest will lessen, and the amount dedicated to your principal will increase.
• Taxes
  The property taxes are due each year. After buying a house, your mortgage lender will likely take a small portion of these taxes each month in your mortgage payment and place them in escrow. The lender then pays the government your collected property taxes once a year. Although you can opt to save this money yourself and pay the annual property taxes independently, having them included in your mortgage payment helps you pay them on time without issue. 
• Insurance
  When buying a house, you'll need to secure homeowner's insurance. Unlike a home warranty, homeowner's insurance is required for all property owners. Insurance covers you, and by extension, your mortgage lender if a natural disaster or other catastrophic event destroys your home. 
• Private Mortgage Insurance
  While this expense isn't applicable in all situations, some individuals buying a house will have to pay Private Mortgage Insurance each month. The PMI isn't meant to protect you, but rather, protect the lender if you don't pay your monthly mortgage payments on-time. It's common to encounter this extra charge in many cases when buying a house with a down payment of less than 20 percent.

As you're considering buying a house, it's wise to see out a mortgage lender or real estate agent to help you estimate your monthly mortgage payment. You can discuss varying down payment amounts, offer prices, and interest rates to understand how high or low your payment may be.

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