Blog

What Fees Are Included in My Monthly Mortgage Payment?

What Fees Are Included in My Monthly Mortgage Payment?

December 18th, 2019 | Purchasing a Home

You think you understand how much your mortgage payment is going to be and then your first bill comes. There seems to be more included in your payment than you expected. What are all the fees in your monthly mortgage bill?

Mortgage Principal

Your mortgage principal is the base amount of money you needed to borrow to buy a home. For example, if you are buying a $200,000 home and you put down $20,000, your principal is $160,000. Almost all home loans are amortized, meaning they are structured so that the amount of principal you repay each month starts out small and increases over time. During the first few years of the loan, you might be amazed to see how little of your monthly payment goes to the actual principal. In fact, your interest portion might be as much as three times your principal amount in the beginning. By the end of the loan, your mortgage portion of the payment will be made up almost entirely principal.

Mortgage Interest

Interest is the amount of money you give the lender for the privilege of borrowing money to buy a house. It is calculated based on the interest rate offered you by your lender. The reason that your interest portion makes us such a large part of your early payments is because the interest is calculated based on the size of the principal. At the beginning of the loan, you owe a lot of principal and the interest is higher. At the end of the loan when your principal is almost paid off, the interest required on that tiny sum is also tiny.

Taxes

Beyond your lender fees, government property taxes are usually included in your monthly mortgage payment. Your escrow company will divide your yearly bill by 12, collect your taxes and insurance payments each month, and pay the premiums for you when they come due.  In some cases, it is possible to pay these as a lump sum once a year. Property taxes are used to pay for schools, fire departments and police departments. Some areas can have higher property taxes than others based on things like home prices or special government bonds.

Insurance 

Insurance premiums are also a typical part of a monthly mortgage payment. Homeowners insurance is required in almost all cases. It provides reimbursement in case of natural disaster, fire or theft. 

For borrowers who put down less than a 20% down payment, private mortgage insurance (PMI) is also required. This protects the lender against borrower default and the accompanying loss of profit. PMI can be cancelled when the buyer reaches 20% equity in the home. Both PMI and homeowners insurance premiums can be paid as once yearly lump sums, but are most commonly divided into the monthly payments.  Even after you pay off your entire mortgage balance you will still be required to pay property taxes and insurance premiums. 

Every mortgage payment contains more than just a principal payment. Understanding all the components of your monthly home loan bill can help you better comprehend the true costs of homeownership.

Comments



Leave a Comment

Contact Us


Not readable? Change text.


Contact Us

American Pacific Mortgage (NMLS# 1850)
Branch NMLS #1732230
9601 Katy Freeway, Suite 420
Houston, Texas 77024
Phone: 713-822-0475
Fax: 866-889-0767
State Licenses: TX
John Frels (NMLS# 282056)

Servicing

888-628-1414
support@apmortgage.com

Hours of Operation:

Monday - Friday, 8:30 am - 5:30pm CST
Saturday, 8:30am - 12:30pm CST

Complaints may be directed to:

888-628-1414
support@apmortgage.com

Texas Mortgage Banker Disclosure

Pursuant to the requirements of Section 157.007 of the Mortgage Banker Registration and Residential Mortgage Loan Origination Act, Chapter 157, Texas Finance Code, you are hereby notified of the following:

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST American Pacific Mortgage SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.Texas.gov. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT DEPARTMENT’S WEB SITE AT WWW.SML.TEXAS.GOV.

THIS DISCLOSURE WAS DELIVERED TO THE CONSUMER VIA OUR WEBSITE.

© 2020 American Pacific Mortgage Corporation. For informational purposes only. No guarantee of accuracy is expressed or implied. Programs shown may not include all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products may not be available in all states and restrictions may apply. Equal Housing Opportunity.