It’s pretty important to know what exactly makes up those monthly mortgage payments you’re making. Most San Diego home owners these days take a pretty lackadaisical approach to not only paying their mortgage payments, but even understanding what all goes into those monthly payments.
Contrary to popular belief, your lender doesn’t just take a giant bag of money from you each month, toss it onto a pile, and mark off that month’s transaction before wishing you a nice day — that money is actually divided up to cover various other costs as well. I thought we’d take a minute today and go over exactly what it is you’re paying each month when you make your mortgage payment, conveniently broken down into four bite-sized chunks:
Principal and Interest
Most homeowners already know that at least a part of their monthly payment goes towards paying down the principal, or original loan balance. How much of your payment goes towards the principal steadily increases over time and is also tied to the amount of interest that you’re required to pay on the loan. Which one you pay more fluctuates — while you’ll be paying more in interest fees when you first get the loan, as time goes on, your interest payments will start to decrease and you’ll be focusing more on paying the principal.
Gotta have insurance on your home, right? Well, yeah, it’s kind of required, actually. In fact, there are many homeowners who are required to carry homeowners insurance if they have yet to pay off their mortgages (which just about covers most of us, anyway).
Where you live can have a pretty big impact on how much you’re paying in insurance each month. Those who live closer to areas prone to fires or floods will be paying more to insure their homes than those who don’t live around those parts of the country.
You didn’t think you could just forget about the tax man, did you? Well, don’t worry — he remembered you all the same. And just like everyone of these other categories, the amount you pay each month can fluctuate all over the place, depending on the current assessed value of your home. It’s important to pay attention to not only your home’s assessed value, but also your local property tax policy, so you’ll always know what you’re paying in taxes each month.