Mortgage Payments

How do Mortgage Payments Work?

For any person who is purchasing a house, a mortgage payment estimate is a very important aspect of the entire process. Your mortgage professional will provide you with a mortgage payment guide that will help you understand how the payment schedules work and what the terms are. Since the amount you pay against your mortgage will have to be factored into your monthly budget, it is crucial for you to understand what steps are involved when calculating your monthly mortgage payments.

Mortgage Payment Basics

Generally, your mortgage payment is due at the start of the month. A large percentage of lenders begin assessing the late-fees on the 15th. It is important that you do not delay on your mortgage payment over 30 days. This is especially important within the first 8 to 10 months after closing on the home purchase.

Numbers that Matter

Once you receive the first mortgage bill, there are certain numbers that add-up to the total mortgage payment estimate:

    • Interest –

Money that is paid based upon a fixed or adjustable rate due to receiving a loan. The amount that is paid monthly is based upon the amount the loan was initially issued for

    • Taxes -

fees that must be paid as a result of a law or codes from the government or district

    • Insurance -

amount that is paid monthly in the case of an accident

    • Mortgage Insurance –

This is separate from regular insurance since it protects the homeowner in the case of economic catastrophe and the lender has to default on the loan.

Free Mortgage Payment Calculator

You can use this free mortgage payment calculator to get an idea about what your monthly-payment will be and the amount you will totally pay over the life of your loan. For additional information about mortgage loans basics, call Mortgages Done Right Inc. experts at (561)777-7622.

Frequently Asked Questions:

Q:  What Is an Impound or Escrow Account?

You’ve heard of the acronym PITI (Principal, Interest, Taxes and Insurance).  The escrow account covers the T&I, and is included in the monthly payment.

Q:  Are Impound Accounts Required?

Government loans, FHA and VA require an escrow to be established when a new purchase or refinance transaction is finalized.

If the LTV is low enough on certain other loan programs, an escrow waiver is allowed.  However, there is typically a higher interest rate associated with a mortgage payment that doesn’t have an escrow account due to the lender taking on more risk.

Q:  If I refinance my existing loan, what happens to my impound account?

The remaining reserves are generally refunded back to the homeowner.

Q:  Can I set up an escrow account later?

Yes, you can request an escrow account at anytime.  Keep in mind that you’ll have to deposit at least 12 month’s of hazard insurance, as well as around 6 month’s of tax payments in the escrow account to get it established.


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