It is useful to find out components of Boca Raton FL recurring home loan payments for budgeting purposes. The acronym PITI is commonly used to remember the items included, which are principal, interest, taxes, and insurance. All mortgages do not necessarily include each of these. It will differ based on your specific mortgage.
Components Of Recurring Home Loan Payments
Principal Contributions
Principal represents the balance of your loan. For most mortgages, a portion of the mortgage payment every month is allocated towards lowering the balance, although there can be exceptions. In the first several years of paying a loan, only a small portion of the payment will go towards principal, but this increases over time.
Loan Interest
Interest is the amount charged by lenders for use of money they lend. The interest rate is always a yearly figure but charged in monthly increments calculated on the balance of a loan. Depending on your loan program, the rate can remain the same for the full term of the loan or it can change at certain intervals.
Taxes
Taxes are levied by Boca Raton FL according to the assessed value of real estate. The total is quoted yearly but traditionally due at specific times of year. Overdue taxes become a lien and take priority over mortgage liens. Many mortgage companies will, as a result, require borrowers to set aside money into an escrow account to ensure that the bills are paid. Funds are collected in monthly increments by the lender as part of the regular mortgage payment. The mortgage company then pays the taxes directly instead of waiting for the borrower to do so. It is a means of protecting their interests in a home.
Insurance
There are two types of insurance for a property. Hazard is typically a requirement while mortgage insurance varies based on the specific loan. Both may be part of recurring loan payments.
Hazard insurance protects against hazards such as fire. Lenders require this insurance to protect the collateral on the mortgage. Insurance premiums are payable on an annual basis and most will require funds be put into escrow (similar to tax escrow). They will then pay the premiums directly to make sure the policy does not lapse.
Mortgage insurance is common on loans greater than eighty percent of the property value or sale price. It protects the bank should a borrower stop making payments. Lenders anticipate that they will not recover the full amount owed if it forecloses, so the mortgage insurance covers some of that. Even though it benefits the lender, the homeowner is responsible for the premiums.
Knowing Boca Raton FL Recurring Home Loan Payments
Not all financing is structured the same and as a result not all Boca Raton FL recurring home loan payments will contain each of the components above. There may be other monthly fees such as condo fees, which are not collected by mortgage companies but are an important consideration in calculating total monthly home expenses. Remember that exact amounts are based on a specific property and interest rate, so any up-front figures will likely fluctuate.For help understanding your future mortgage payments, contact , Sonny Solomon at The Keyes Company at 561-247-1047 or sonny@sonnysolomon.com to be referred to a local lender.
