Monthly Payment Breakdown

​What is included in your monthly payment? Your monthly payment is made up of your Principal (based on your loan amount), Interest (based on your rate), Escrows (taxes and homeowner insurance), and in most cases Mortgage Insurance. Your monthly payment DOES NOT include charges such as: Utilities, HOA Fees, Condo Association Fees. It is important to not only be able to afford your monthly mortgage payment, but all other costs associated with owning your home.

Principal and Interest

Principal - Each month a portion of your payment will go towards paying down the principal balance of your loan. The principal balance is based on the loan amount (The Principal Balance on a $100,000 loan is $100,000). Loans are structured so the amount of principal returned to the borrower starts out low and increases with each mortgage payment. The payments in the first years are applied more to interest than principal, while the payments in the final years reverse that scenario. 

Interest - The interest is the lender's fee for loaning you money. In most cases, interest rates are fixed over the life of the loan. However, there are loan programs with adjustable rates that fluctuate over time. The interest rate on your mortgage directly impacts the size of your monthly mortgage payment. The higher the interest rate, the higher the monthly payment. 

What Are Escrows?

​Escrows are monthly payments toward your property taxes and homeowner’s insurance policy. These monthly payments are collected with your mortgage payment and put into an escrow account.  When property taxes and insurance charges become due, your loan servicer will take the funds from your escrow account and make these payments for you. 

For example, you owe $300 in property taxes every 6 months, and you owe $600 for your Homeowners Insurance Policy every year. When you convert these charges into monthly payments, each charge will be $50/month. 

• In Ohio, your property taxes are paid twice a year, once in December or January and again in June or July (based on your county).
• Your homeowner’s insurance policy is typically paid, in full, once a year.

What is Mortgage Insurance? 

Mortgage insurance is protection for the lender, not you, in the event that you fall behind on your mortgage payments. Paying for mortgage insurance lowers your risk profile and allows you to qualify for a loan you might not otherwise be able to get. If you put less than 20% down for your home, you will typically have to pay for mortgage insurance each month. These payments end up being included in your total monthly payment.  Each loan program has different mortgage insurance options, different mortgage insurance costs, and different time periods that you must keep your mortgage insurance. Check out the table below to see the differnce in mortage insurance by program:

Conventional

• Most lenders will arrange for you to buy Private Mortgage Insurance (PMI).
• The PMI rate varies by down payment amount and your credit score but is typically cheaper than FHA/USDA mortgage insurance. 
• PMI drops off the loan at 80% Loan to Value

FHA / USDA

• Mortgage insurance premium is paid to the Federal Housing Administration (FHA)
• Costs the same regardless of credit score, slight increase in payment for borrowers who put less than 5% down
• Insurance stay on the loan for the life of the loan.
• Borrowers who put more than 10% down can remove insurance after 11 years.

VA

• No mortgage insurance premiums
• VA Guarantee Fee replaces the mortgage insurance cost. This fee is paid for at closing
• VA Guarantee Fee varies based on VA customer profile, see VA Loan Program page for more details.