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What makes up your monthly mortgage payment?

Many of our South Florida readers make a monthly mortgage payment. But does everyone know what all is accounted for in that monthly payment?

First and foremost, there is the portion of the mortgage payment that is applied toward the interest owed on the loan. At the beginning of the repayment of a mortgage loan, the monthly mortgage payment is almost completely applied toward interest. However, this changes a little bit every month as the payments are being made, and eventually more of the payment amount will be applied toward the other primary part of the monthly mortgage payment - principal.

The principal is the actual amount of money that was borrowed - say, $150,000 for an average piece of residential property. As the monthly mortgage payments continue, each month a bit more will be applied toward paying this balance. By the end of the mortgage, the balance is paid in full.

Lastly, many mortgage holders will include their property taxes and home insurance in their monthly payments. Although these two payments are usually only made once or twice per year to the respective places they are owed to, a mortgage company can collect these funds and hold them in an escrow account for the mortgage holder. The mortgage company will send out the payments as they come due. However, our South Florida readers should note that having property taxes and home insurance accounted for in the monthly payment may cause slight fluctuation in the payment when the mortgage company does a yearly recalculation based on whether or not enough was collected to pay the correct amount of property taxes owed or the home insurance premium.

Source: www.homeloanlearnincenter.com, "What's in a Mortgage Payment," accessed on Jan. 31, 2015

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