HOW IS MY MORTGAGE PAYMENT CALCULATED
So I put my price in a mortgage calculator that I found on one of these cool websites, and it says the payments only like fifteen hundred bucks. How come the mortgage lender is telling me my payment would be more like eighteen, nineteen hundred bucks? Well, the anatomy of a mortgage payment consists of several different things, right? The principal, the interest. It typically rolls in your tax, right? Tax divided by 12, put an escrow added to your payment.
So the mortgage company makes your quarterly tax payments, right? In some cases what’s called PMI, private mortgage insurance, that’s to make sure that if you were default on the loan, that the bank doesn’t eat your kind of default. Because the first couple years of the loan is pretty much interest only, the front half of all mortgages are heavily loaded on interest. And then over time, it kind of amortizes his way to be more principal than interest.
But in the beginning part of a loan, it’s always the interest, okay. And then of course if you are going to purchase a condo, there may be a condo fee that may filter in there. So you need to be very careful about what the mortgage calculators tell you, and understand what the true cost of a home is. Again principal, interest, tax insurance is also in there, your private mortgage insurance. Homeowners insurance is different than the private mortgage insurance, and then of course your PMI, your private mortgage insurance.
If of course, the equity in the house isn’t greater than 20% then typically the PMI, private mortgage insurance is tacked into that. So again when you’re putting your, you say I can afford 200, I can afford 250, well how did you get to that? Well, I put in the mortgage calculator and it spit out 1200 bucks a month, that’s really right in my budget.
So the best way to see how much home you can afford based on a monthly payment, is to certainly call your local lender, and put these five factors in together to see what that mortgage payment would be. So hope you enjoyed the anatomy of a mortgage payment, hope it makes sense. @WorkwithEvan on twitter feed, EvanRussellteam.com. Russellrealtyminute.com, thank you.