Calculate your Monthly Mortgage Payment
A big thanks to Shannon Ernest, Loan Officer at RiverHills Bank, for sparking this conversation about understanding mortgage payments. Her insights inspired me to share this breakdown for everyone’s benefit!
Understanding Your Monthly Mortgage Payment: The Breakdown Beyond PITI
Your monthly mortgage payment might seem like a single, mysterious number, but it’s actually made up of several key components. Understanding these parts – often referred to as PITI+MI – can help you budget effectively and make informed decisions about your homeownership journey.
PITI+MI stands for:
- Principal: This is the amount you borrowed from the lender to finance your home purchase. Each month, a portion of your payment goes towards reducing this principal balance.
- Interest: This is the cost of borrowing the money. The interest rate you qualify for will determine how much of your payment goes towards interest, and how much goes towards paying down the principal.
- Taxes: Every year, you’ll be responsible for property taxes to your local government. In some cases, your lender may collect a portion of these taxes each month and hold them in escrow, then pay them to the tax authority on your behalf. This ensures your taxes are paid on time and avoids any penalties.
- Homeowner’s Insurance (HOI): This insurance protects your home and its contents in case of damage from fire, theft, or other covered perils. Similar to property taxes, some lenders may collect a portion of your HOI premium each month and hold it in escrow for annual payment.
- Mortgage Insurance (MI): This insurance protects the lender, not you, in case you default on your loan payments. If you put down a down payment of less than 20% of the home’s purchase price, you will typically be required to pay for private mortgage insurance (PMI) as part of your monthly payment. There are also government-backed loans (FHA, USDA) that require mortgage insurance, but the terms differ from PMI.
By understanding these components, you can take charge of your finances and make informed decisions throughout your home ownership journey.
Still, have Questions? Talk to Sarah.
Shannon Ernest Senior Loan Officer at RiverHills Bank
📱Call or Text: 513-378-7799 📩Email: Sernest@rhb24.com 👇 Apply with Shannon https://Shannon Ernest.com