What are the components of a monthly payment?
Your monthly payment is the sum of four factors, commonly referred to as PITI (Principal, Interest, Taxes, Insurance). You may also be required to pay PMI on a monthly basis. Principal – The amount of the payment that is applied to the loan balance. Interest – The charge paid for borrowing money. Taxes – Property taxes. May also be paid separately to your local government. Insurance – Lenders require you to maintain adequate insurance to protect your home. This may also be paid separately. PMI (Private Mortgage Insurance) – For a detailed explanation of PMI, consult the question about Private Mortgage Insurance in this section, or see Mortgage Insurance in the Glossary.
The monthly payment is determined by the loan amount, the term of your loan, and the interest rate. The components of a monthly payment are the following: Principal: The portion of your loan that is being repaid with this payment. Interest: A portion of the amount of finance charge you are paying us for the use of the funds borrowed. Insurance: This is the portion of your payment that will be held for payment of homeowners’ insurance premiums when they come due. (This is known as Homeowner Insurance Escrow.) In some cases we allow you to pay your own taxes and insurance, however there is a fee for waiver of Tax Escrow. Ask your Outlet Mortgage Group Mortgage Advisor about waivers of escrows. PMI: Primary Mortgage Insurance is required when your loan exceeds 80% of the value of your property. (Some loans may require Flood Insurance.
