What Goes Into Your Monthly Payments?

mortgage paymentsWhen you are looking at purchasing a home, the price likely seems astronomical; after all, very few people have hundreds of thousands of dollars available to put towards a home. Because of this, most individuals need a mortgage — which is paid each month until they attain full equity in their home. In today’s blog, Family Home Loan Texas discusses the various components that make up your total monthly mortgage payment.

The Principal

The principal is essentially the amount of money you borrow to purchase a home. If you buy a home for $400,000 and make an $80,000 down payment, your principal is $320,000. This is the amount you must repay to your lender. As this amount decreases, you will gain more equity in your home. When you are in the market to buy a house, it is typically advisable to put 20% down. While not everyone can swing this, it will afford you lower interest rates — decreasing the total amount you have to pay back. That said, there are government-backed loans (like FHA loans) that require a much lower down payment. 


Interest payments make up a large part of what you will spend monthly on a mortgage. It basically compensates a lender for taking the risk of allowing you to borrow money from them. The higher the interest rate, the more money you will have to spend over the duration of the mortgage. With this in mind, if you make a larger down payment (around 20%) your interest rate will be lower than someone who puts down 5%. Ultimately, you need to do what makes the most sense for you financially, but you will pay less in the long run if you put more money down and pay a lower interest rate. It is advantageous to have a higher portion of your monthly payments go towards the principal rather than the interest.


As you likely know, taxes are inescapable. They are used to fund various services like schools and police departments. When you have a mortgage, a portion of your monthly payment goes towards taxes. The lending institution you use holds onto your tax payments in an escrow account and releases them to the government when they need to be paid. It is important to factor taxes into your budget when shopping for a house.


There are two types of insurance you will have to pay. Property insurance covers your home and most of its contents from fire, theft, and various other disasters — like floods, tornadoes, and others. The second is called PMI (private mortgage insurance) and typically applies to those who put down less than 20% of the home’s cost. It protects and compensates the lender in case you are unable to repay the loan you took out. 

Contact Us To Learn More About Your Mortgage Payments

Taking out a mortgage is a major commitment, so you are well-served to fully understand what goes into your monthly payments. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about how he and his team can help you through all aspects of buying a home and the associated monthly payments.