What’s Included in Your Monthly Mortgage Payment in Texas

The Four Ingredients of a Texas Mortgage Payment

It is often asked what is all included in that bill that comes every month called a mortgage payment. I advise checking up on exactly what portion of your payment goes toward principle every few years. That thought brings me to explain the four ingredients of a mortgage payment.

Let’s start with principle. Principle is the amount left due on the home loan apart from interest. As I’ve already suggested, your principle should be the main element your monthly check is going toward. Now this is usually outmatched by the interest you are paying in the beginning years of your mortgage. Toward the latter half of the mortgage term, however, most of your payment goes directly to pay down the principle.

The next ingredient is interest. If you have a fixed-rate mortgage, your interest is determined by the rate with which you originated the mortgage. On the other hand, if you have an adjustable-rate mortgage (ARM) then your interest rate will depend on the index to which it is attached.

Now we come to mortgage insurance. Mortgage insurance costs, whether it be PMI or MIP, are included in your monthly bill until enough equity is accrued to render them no longer necessary. This is usually when you hit about 20% paid on the mortgage.

What is a Property Tax Escrow Account

Lastly, there are property taxes involved in your mortgage payment. In order to keep your tax condition in good standing, your lender will generally create an escrow account for you to be able to deposit money on a monthly basis rather than having to come up with a large amount of funds at tax time. However, this is subject to be different with individual lenders and loan types.

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