How is a Mortgage Payment Calculated?
At the time of closing on a mortgage (buying the property), your bank will explain how the payment works. Most of the payment is principal and interest. Depending on the loan, personal mortgage insurance, real estate taxes and/or homeowners insurance can be part of the payment.Principal and InterestPrincipal and interest (P&I) are the loan amount and the interest the bank is charging amortized over the term of the loan. By using an online mortgage calculator, you can calculate that the P&I payment on a $100,000 loan over 30 years at 4.5 annual percentage rate would be $1097.75 per month.Personal Mortgage InsurancePersonal Mortgage Insurance (PMI) is required when you put less than a 20 percent down payment on your mortgage. It is insurance that protects the bank if you fail to make your payments and it must foreclose on you.EscrowEscrow is an account the bank uses to save for future expenses related to your loan. It is a forced savings account. Real estate taxes and homeowners insuranc
