What Goes Into a Mortgage Payment?

Posted by Laine Smith on 8/16/13 9:41 AM

Understanding what goes into a mortgage payment is very simple. A monthly mortgage payment includes at least two parts: principal and interest. Principal is the amount of money you have borrowed and interest is the cost of borrowing that money.

For most homeowners, there is also a third part that is paid into an escrow account. Escrow is a financial instrument created in order to store money collected by a lender. The escrow account allows you to pay for things like homeowners insurance, property taxes, condominium and association feeds and mortgage insurance, if applicable. When your taxes and insurance are due, the lender pays them for you from the escrow account. This amount of your mortgage can increase or decrease, even with a fixed-rate mortgage. Therefore, your mortgage will include principal, interest, taxes and insurance, also known as the acronym PITI.

For example, you find a home that costs $170,000. You are able to make a down payment of 5 percent, or $8,500. The annual property taxes are $1,200 and the annual homeowners insurance is $720. Because your down payment is less than 20 percent, you will pay private mortgage insurance (PMI), as well.

With a 30-year fixed mortgage and an interest rate of 4.5 percent, your PITI with PMI is as follows:

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How Location Affects Property Value

Posted by Laine Smith on 8/9/13 11:24 AM

When it comes to determining property value, what are the three most important factors? Location, location, location.

A “good” location can be determined by dynamics as broad as the economic stability of the community or as specific as to where the home is situated within a certain neighborhood.

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What is an Escrow Account?

Posted by Laine Smith on 8/2/13 12:39 PM

An escrow account is a financial instrument created in order to store money collected by a lender to pay for property taxes and hazard insurance when they become due by a third party. A lender will usually require monthly escrow payments to ensure that they have enough funds to pay for taxes and insurance. Since an escrow account is often used in the sale of a home, lenders will require these payments to guarantee that their collateral is secure.

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How to Calculate Property Taxes

Posted by Laine Smith on 7/26/13 3:01 PM

Property taxes can drastically change your monthly mortgage payment depending on where you decide to buy your home. They also can be very confusing for a lot of homeowners. To understand how much property tax you should be paying you need to understand how your property is valued and how the taxes are actually calculated.

The government collects real estate taxes, also known as property taxes, to fund multiple municipal operations, schools, public services and roads. The way that property taxes are calculated would be through the use of the mill levy and the assessed property value.

The first thing you will want to do is get your home's assessed value. You can either call or visit you county tax assessor's office or get the information from their website. Next you will need the taxable percentage of assessed value. As an example, let's say your assessed value is $200,000 and that 30 percent of assessed value is taxable. Multiply the taxable percentage by

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