What Does a Mortgage Payment Really Include?
When you see a house listed for sale, you might see an estimated monthly payment.
It can look pretty simple.
But your actual monthly cost of owning that home may include quite a bit more than just the mortgage itself.
Understanding the pieces before you buy can help you compare homes more realistically.
Principal
This is the portion of your payment that goes toward paying down the amount you borrowed.
As you make payments over time, your loan balance generally decreases.
Interest
Interest is what you pay the lender for borrowing the money.
Your interest rate can have a significant effect on your monthly payment and the total amount you pay over the life of the loan.
Your lender can explain your specific loan terms and options.
Property Taxes
Property taxes are another major part of the cost of owning a home.
Depending on your loan and how your taxes are handled, your lender may collect money for property taxes as part of your monthly payment and place it into an escrow account.
Property taxes can also vary significantly from one property to another—even between homes with similar purchase prices.
This is one reason I always want buyers looking at the actual property, not just the price.
Homeowners Insurance
You’ll generally need homeowners insurance when you finance a home.
The cost can vary depending on the property, coverage, location and other factors.
Your insurance agent can help you understand what coverage you need and what it may cost.
Mortgage Insurance
Depending on your loan type and down payment, mortgage insurance may be part of your monthly cost.
The rules vary by loan program, so this is something to discuss with your lender.
Don’t assume that every buyer will have the same mortgage insurance requirements.
HOA Fees
If the home is part of a homeowners association, there may be a monthly, quarterly or annual association fee.
And this is important:
HOA fees are generally separate from your mortgage payment.
So when you’re comparing homes, make sure you’re looking at the total monthly cost—not just the mortgage estimate.
Utilities
Your utilities aren’t usually included in your mortgage payment, but they’re still part of your monthly housing budget.
Think about:
- Electricity
- Gas
- Water
- Sewer
- Trash
- Internet
- Other services
Utility costs can vary based on the size and age of the home, energy efficiency, number of occupants and how you use the property.
Maintenance and Repairs
This is the one new homeowners sometimes forget.
Your mortgage payment doesn’t cover:
- A broken furnace
- A leaking water heater
- A plumbing problem
- A roof repair
- Appliance replacement
- Landscaping
- Routine maintenance
Those expenses are yours.
And they don’t always arrive at convenient times.
The Number You Really Want to Know
Instead of asking:
“What’s the mortgage payment?”
I want you to ask:
“What is my total monthly cost of owning this home?”
That’s a much better question.
For example, two homes could have very similar purchase prices but very different monthly costs because of differences in:
- Property taxes
- Insurance
- HOA fees
- Mortgage insurance
- Interest rate
- Utilities
- Maintenance needs
The purchase price is important.
But it isn’t the whole story.
Ask Your Lender for the Full Picture
Your lender can give you a much more accurate estimate based on your specific loan, down payment, interest rate and financial situation.
Ask questions.
Understand what is included.
Understand what isn’t.
And don’t be afraid to say:
“Okay, but what am I really going to be paying every month?”
That’s a perfectly reasonable question.
One More Thing
Online mortgage calculators can be useful for getting a general idea.
But they are not a substitute for an actual conversation with your lender.
The numbers can change based on your specific situation and the property you’re buying.
That’s why I want my buyers to understand the numbers before they fall in love with the house.
A beautiful house is wonderful.
A beautiful house that fits comfortably into your budget?
Even better.
Have a Question?
Buying a home comes with a lot of questions. You don’t have to figure everything out on your own.
Have a question about something you read here? Want to talk through your situation? Or just not sure what your next step should be?
I’m happy to help.
Schedule a Time to Talk With Karyn
No pressure. No obligation. Just straight answers.
Prefer to just send me a question?