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Breaking Down A Mortgage Payment For Grand Rapids Homeowners

It is important that you know what goes into your mortgage payment. Understanding all the variables and the different things that you are paying for can help you keep the cost of your mortgage to a minimum and allow you to get the best deal on your next home. What goes into the price of your mortgage?

Start With the Principal 

The first piece of the mortgage puzzle is the principal payment. This is the amount that you owe on the loan itself. The actual amount that you pay each month on the house plus the interest on the loan is known as the PITI payment.

Add On Taxes and Insurance

After you calculate the PITI, you have to consider taxes and homeowners insurance. You typically pay the first year’s worth of taxes when you buy your home and future years are generally rolled into your mortgage. The same may be true of your homeowners insurance as well. However, you may be able to pay your taxes and insurance as a separate upfront payment.

Mortgage Insurance Could Be Included

If you put less than 20 percent down on the home, you may be required to pay mortgage insurance until you have paid an equivalent of 20 percent of the home’s value. The good news is that you may be able to get to that 20 percent level faster if your home increases in value. Once you have reached the 20 percent threshold, you should contact your lender to have the mortgage insurance cancelled immediately.

Homeowners Association Fees May Be Added as Well

Homeowners who live in a community ruled by a HOA may need to pay fees and other dues to be part of the association. These fees will help pay for garbage pickup and other services that the entire community will benefit from.

Knowing what goes into your mortgage payment can help you negotiate the best possible deal on your next home loan. By taking into account taxes, insurance and mortgage insurance, you can better set your budget when shopping for your first home or for your next home that you want to live in for many years.