What is Included in a Mortgage Payment?

When it comes to homeownership, a mortgage payment is a significant financial obligation that requires careful consideration. Understanding what is included in a mortgage payment is crucial for making informed decisions. In this article, we will explore the components of a mortgage payment, focusing on homebuyers in Kansas and Missouri and the mortgage services provided by Metropolitan Mortgage Corporation.

1. Principal and Interest Payments

The principal and interest payments form the core of a mortgage payment. The principal refers to the amount borrowed to purchase the home, while the interest is the cost of borrowing money from the lender. These payments are typically spread over a predetermined period, such as 15 or 30 years. Use our mortgage calculator to estimate your payment.

2. Property Taxes

Property taxes are an essential component of your monthly payment. These taxes are levied by local governments based on the assessed value of the property. The amount varies depending on the location and the value of the home. It’s important to note that property taxes may fluctuate over time due to changes in local tax rates or property assessments.

3. Homeowners Insurance

Homeowners insurance is another critical element of your payment. It protects the homeowner from potential risks, such as fire, theft, or natural disasters. The cost of homeowners insurance varies based on factors like the location, size, and value of the property. Lenders typically require homeowners insurance to ensure the protection of their investment.

4. Private Mortgage Insurance (PMI)

If the down payment made towards a home purchase is less than 20% of the home’s value, lenders may require borrowers to pay for private mortgage insurance (PMI). PMI protects the lender in case the borrower defaults on the loan. This additional cost is usually included in the monthly mortgage payment until the borrower reaches a certain level of equity.

5. Additional Fees or Assessments

In some cases, there may be additional fees or assessments included in your payment. This could include homeowner association (HOA) fees. It’s important to ask your Realtor when making an offer if any additional costs are associated with the property. Please note that lenders do not include HOA fees in your monthly payment and will need to be paid seperately.

Impound Account

Mortgage lenders often set up an impound account to handle property tax, homeowners insurance, and private mortgage insurance payments for the homeowner. A portion of the monthly payment is allocated to the impound account, ensuring prompt payment of these expenses. However, if you make a down payment of 20% or more, you have the option to “waive escrows” and pay these expenses directly on your own, excluding them from your regular mortgage payment.

Conclusion

Understanding the components of a mortgage payment is crucial for homeownership. In Kansas and Missouri, Metropolitan Mortgage Corporation can assist you in navigating the mortgage process effectively. By providing expert guidance and personalized solutions, they ensure that your mortgage payment aligns with your financial goals.