Understanding Monthly Mortgage Payments - Service First Mortgage

The mortgage principal isn’t the only portion being paid each month. There are actually multiple components factored into your monthly mortgage payment.

Principal and Interest

The monthly mortgage payment which includes the interest accrued during the prior month plus the scheduled principal. Generally, mortgage interest paid is a federal income tax deduction, which could mean a savings at tax time! (Always check with a CPA.)

Property Taxes

Are specific to the subject property. We have estimated property taxes based on your target purchase location. Once you have a specific home we can update the numbers to the exact property taxes. Tax rates vary depending on the city, county, and school district.

Generally, property taxes are a federal income tax deduction, which could mean a savings at tax time! (Always check with a CPA.)

Homeowners Insurance

Also referred to as Hazard Insurance. This insurance protects you, the property owner, against damage to your home. The final cost of the insurance policy is determined by the insurance company selected. Some factors that affect the costs are age of the home, claims history (on the subject home and on the applicant), age of the roof, property location, and your credit history.

Mortgage Insurance

M.I. or PMI is an insurance policy to protect the lender in the event that a borrower does not make their loan payments and defaults on the loan. The cost of Mortgage Insurance decreases as your down payment increases. If you put down 20% of the purchase price (or more), mortgage insurance won’t be required.

Options include monthly insurance, one time paid at closing, or selecting a slightly higher interest rate in return for no monthly MI, among others.

FHA loans require M.I. regardless of down payment in most cases; VA loans do not ever require M.I.

Homeowners Association Dues

A charge from the community in which the home is located. These funds are used for everything from maintenance of the community common areas to managing the neighborhood. These fees are paid separate from your mortgage but must be included in your debt to income ratio for qualification.

By understanding your monthly payments, you can ensure that you are in the best position possible to make an informed choice regarding your home loan. However, if you still have questions, one of our Loan Officers can assist!