What expenses come with a Mortgage

What expenses come with a Mortgage

Before you buy a house, you'll want to know what to expect when it comes to expenses. A mortgage can be intimidating, but knowing how much you'll be paying each month helps you prepare for the financial commitment and plan accordingly. Here are some of the most common expenses that come with a mortgage payment:

PITI

PITI means principal, interest, taxes, and insurance.

It is the sum of these four parts:

• The mortgage principal - the amount you borrowed to buy your home
• The mortgage interest - how much it costs you to borrow money from a lender (in addition to the principal) each year
• Property taxes - taxes on your property that are based on its value and location
• Insurance policies (essentially homeowner's insurance)

Mortgage Insurance

Mortgage insurance is required by some lenders and can be added to your monthly payment or paid in a single lump sum.

If you’re not sure if you need mortgage insurance, consult with a loan officer to determine whether it's right for you.

Homeowner's Insurance

Homeowner's insurance protects your home and personal possessions from damage or loss due to fire, smoke, wind, hail, theft, or other covered disasters. It also covers liability if someone is injured on your property. If you put down less than 20% typically you will pay this along with your Mortgage Payment and hold an escrow account with your lender.

Property Taxes

Property taxes are usually paid yearly to the county or city. Property taxes are usually payable in arrears, which means that homeowners will be billed annually for their property tax from the date they purchase their home. Property taxes are based on the value of your home and not its market value. The amount you pay will depend on many factors such as where you live, where it is located, and what kinds of exemptions may apply to your situation.

Property tax rates vary widely according to the municipality and even within municipalities depending on location. Like Homeowners insurance if you put less than a 20% down payment you will usually pay monthly along with your mortgage payment and hold escrow with the lender. Otherwise, they are paid directly through electronic payments or checks made out directly to their local government entity responsible for collecting taxes each year around October 1st (or some other predetermined timeframe depending on where you live).

HOA Fees

Homeowners' associations (HOAs) are a common feature of condos and townhomes. These fees are paid to the HOA by homeowners, and the money is used to maintain the common areas of the building—think floors, hallways and stairwells. If you're buying into an HOA-managed community, you may be able to get information about its rules for keeping up with maintenance fees from your realtor or Loan Officer.

HOA fees may be paid monthly or annually (mostly depending on how much maintenance is required each year). In addition to paying these regular payments toward the upkeep of shared resources like landscaping and pools. There may be larger expenses or repairs that the community decides to increase fees for a set amount of time an "assessment" till completed —which means it's often included in monthly mortgage installments as well.

Flood Insurance

Flood insurance is an add-on to your mortgage that pays for damage caused by floods. Flood insurance is not mandatory unless you live in a flood zone area, but it's a good idea to get it if you live in a severe weather area. The cost of flood insurance varies depending on the type of mortgage you have, how much coverage you want, and your location.

Mortgage Payments

Mortgage payments are the main expense of a mortgage. Mortgage payments are the amount you pay to the lender each month. Mortgage payments are usually the largest expense in your monthly budget. They are usually made monthly, but sometimes can be made quarterly or semi-annually if you have an adjustable rate loan or interest-only payment plan.

Knowing what to expect helps you plan for a mortgage.

Knowing what to expect helps you plan for a mortgage.

Mortgage payments are a combination of PITI, which stands for principal and interest, property taxes, and insurance. You will have these payments every month (or at least every month that your home is mortgaged). The most common way of paying off a mortgage is through fixed monthly payments until it is paid off completely. This lets you pay less overall than if you made only the interest payments each month because those would increase as time goes on. Fixed monthly payments also help ensure that your budget stays stable because they won't change much over time except when there's an increase in one or more items in your budget that causes them to go up slightly--and since all three categories stay consistent over time (except when there are rate changes), this makes budgeting easier than it could be otherwise

After reading about all the different costs you'll be responsible for as a homeowner, you may be feeling a little overwhelmed. Don't worry! It's normal to feel that way. Make sure to work with a Mortgage Broker or Loan Officer who guides you throughout the process. The important thing is to understand what your mortgage will cost you and plan accordingly. Don't forget: buying a home is an investment that will pay off in the long run!