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Weston Dean Homes Blog

Components of a mortgage payment

January 6, 2017

  If you are currently shopping for a New Braunfels custom builder to build your new home in 2017, you may not be aware of all that makes up the mortgage payment you will need to plan for. Many new homebuyers aren’t familiar with the process of getting a mortgage, let alone what goes into the mortgage payment itself. Weston Dean Custom Homes shares an insight on what you can expect your home mortgage to be made up of. The importance of understanding the dynamics of what goes into a mortgage payment can help you acquire bigger loans with fewer drawbacks. There are four components that make up your mortgage payment that you will want to be aware of. The first component of a mortgage payment is the Principal. This is the total value of the loan that you borrow from the lender, minus the interest. At the onset of paying off your mortgage, the principal portion of paying off each monthly fee will be small and eclipsed by the interest portion. However, as time passes and you acquire more equity in your home with each portion of the loan reimbursed, the final stretch of your mortgage term will be largely composed of principal installments. Taxes are the third component that will make up your home loan. The taxes in our mortgage payment will refer to the property taxes that are typically gauged by local or municipal governing bodies based upon the value of the real estate in your area. You can pay your taxes through your loan office by setting up an escrow account. Each month the lender collects funds from your periodic mortgage payments to put into escrow. This will remain untouched until taxes are due. The portion of your monthly mortgage payment that is appointed to tax obligations equals one-twelfth of the yearly tax amount. The third component of your mortgage will be the Interest portion, which is the one most people are aware of the most. The interest will be the expense that the lender charges you for the ability to borrow their loan for your home. The interest rate will directly influence the size of your loan as higher rates turn out smaller loans. Your credit score will determine what type of interest rate you are offered on a home loan and the better your score, the lower the interest rate that you will be offered. This is why it is critical for people to work on having good credit scores before going to try and purchase a new home. Your lender, when you choose one, will write up a loan agreement with the period of time in which you have to pay off the mortgage. Most homebuyers favor 30-year contracts, as their monthly payments are smaller. However, if you are looking for a lower interest rate for your home, consider a 15-year home loan which typically will come with a lower interest rate. Lastly, Insurance will be the final pillar that makes up the four components of your mortgage payment. The insurance portion of your mortgage will cover your property insurance and private mortgage insurance. One way to cut down on your monthly payment some if you are able too, is to pay off your PMI up front when you sign for your home. This will cut out having to pay it off over time within the loan. Knowing what comprises your mortgage payment will help you not only better understand where your money is going too each  month, but also ensure you get the best deal you can on your mortgage.     Weston Dean Homes is a San Antonio area custom home builder.  For more information call (210) 408-9107.
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