What’s in a Mortgage Payment? Hint: It’s Not Just Your Loan

What’s in a Mortgage Payment? Hint: It’s Not Just Your Loan

If you are a first-time home buyer, you may not know that your mortgage payment consists of more than just the loan you’re approved for. This is especially important to understand, because these additional “pieces” raise the amount of money you’ll be paying out-of-pocket every month. Depending on the size of the home you are buying, this could be more than you can truly afford.


The meat of your monthly mortgage payment is the loan you were approved for by the lender. This is typically the purchase price minus your down payment, plus interest. The amount depends on your loan amount and terms.


If you make less than a 20% down payment, you will be required to pay PMI or Private Mortgage Insurance. This insurance protects the lender until you prove you are financially stable and will make payments. It typically costs 0.5% – 1% of your loan amount per year and automatically goes away after 5 years or when you reach 20% equity.

Homeowners Insurance

When a lender gives you money to purchase a home, they are investing in your property. Of course, they want to make sure their investment is protected, which is why they require the home be insured. If the insurance lapses without their knowledge and the house is damaged or destroyed, they will lose a whole lot of money. To avoid something like this happening, most lenders pay the insurance on behalf of the homeowner. They collect part of the insurance every month and put it into an escrow account until the payment is due. When the mortgage is paid off, the responsibility of paying the insurance is transferred to the homeowner.

Property Taxes

Like the homeowners insurance, the lender collects part of the yearly property taxes and places it in an escrow account until payment comes due. It is another measure they take to make sure the property is not unknowingly in default. But many homeowners like the property taxes included, because it breaks up a normally large annual/bi-annual payment into smaller monthly payments.

Once you go under contract on a home and secure insurance, your lender can help you calculate your total monthly payment. They will give you a breakdown of your closing costs, which will have all these important details, including the amount of money, if any, you will need to pay on your closing day.

If you have any questions about mortgages or would like to be referred to one of the local lenders we work with, let us know! Send us a message through our contact page or give us a call at (910) 202-2546.

What’s in a Mortgage Payment? Hint: It’s Not Just Your Loan

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About the Author
Meghan Henderson
Meghan is the Marketing Specialist for The Cameron Team and a published author of two young adult books. She also creates digital and printable planners and trackers, as well as coloring pages for Larkspur & Tea.