Understanding the Mortgage Payment

Mortgage Tips

The mortgage principal is not the sole contributor to a mortgage payment. What is in a mortgage payment consists of 4 main components:

PITI – Principal, Interest, Taxes, and Insurance


The loan amount borrowed and spread over the life of the loan.


The fee agreed to pay as a borrower when you took out you agreed on your home loan. Interest is measured as a percentage and can vary depending on market conditions, credit score, and home loan program.


A portion of your mortgage payment will go toward taxes, paid to your local government. The payment depends on multiple factors; city’s or town’s tax rate, the property itself, homestead/non-homestead qualification. One year of Summer and Winter taxes can be submitted with a loan application of the desired property.


A portion of your mortgage payment goes toward homeowners insurance, required to receive a home loan. Loan institutions want to be sure the property financed is protected in case of theft/damage. (Michigan requires flood insurance.)

Note: Some lenders do not require borrowers to escrow their monthly mortgage payment. The homeowner pays insurance premiums directly to the insurance company and property taxes directly to the tax assessor. The mortgage payment is only principal and interest.

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