Demystifying Mortgage Payments: What Goes into Your Monthly Bill
Welcome back to another Mortgage Moment with Ashley and Bill! Today, we’re diving deep into the various components that make up your mortgage payment. It’s not just about the money you owe to the bank; there’s a lot more to consider, including taxes, insurance, and even homeowners association fees. Join us as we break it all down for you.
Understanding Your Mortgage Payment:
- Principal and Interest: Your mortgage payment primarily covers the principal amount you borrowed from the bank and the interest on that loan. This is what most online calculators focus on, but there’s more to it.
- Property Taxes: Homeowners are required to pay property taxes to the county every year. To make this manageable, your lender divides the annual tax amount into 12 monthly payments, which are added to your mortgage bill.
- Homeowners Insurance: Protecting your home is essential, so you’ll need homeowners insurance, especially if you have a mortgage. Just like property taxes, your annual insurance premium is divided into monthly installments and included in your mortgage payment.
- Mortgage Insurance (if applicable): If you didn’t make a 20% down payment on your home, you’ll likely need mortgage insurance. This insurance protects the bank in case of default, and its cost is factored into your monthly payment.
- HOA Fees (if applicable): If your home is part of a homeowners association, you’ll have monthly HOA fees. These fees cover various services and amenities in your community and are included in your mortgage payment if applicable.
- Property Value and Taxes: The value the county assigns to your property for tax purposes may not always match the purchase price of your home. Lenders use the county-assessed value to calculate your taxes. However, after closing, you can rectify this by providing the county with your closing disclosure, which may result in a tax refund.
- Protest Your Property Taxes: It’s crucial to keep an eye on your property’s assessed value and protest your property taxes if necessary. Many homeowners neglect this opportunity to save on taxes, but it’s your right to challenge the county’s assessment.
- Homestead Exemption: Don’t forget to apply for a homestead exemption with your county as soon as you move into your new home. It provides some protection against excessive tax increases.
Your mortgage payment is more than just a simple calculation of principal and interest. It includes property taxes, homeowners insurance, potential mortgage insurance, HOA fees, and more. Understanding these components will help you make informed decisions about your homeownership journey. If you have any questions or need assistance, feel free to reach out to us. Stay tuned for more Mortgage Moments coming your way!