5 Distinct Components of a Mortgage Payment You Need To Know
4 minute read
September 3, 2019


The one thing that is inevitable in the lives of most American adults is mortgage payments. Above all, the majority of people are unable to afford to pay for a new home upfront. They have to resort for a mortgage and pay it back over a specified period of time. So if you are thinking about it, you should know the major components of a mortgage payment.

Paying a monthly mortgage can be the bane of existence for those looking to enjoy financial freedom, but it is unavoidable for the average American. Whether you’re paying off a mortgage for your first, second, or even your fifth home, chances are that you’ve probably had to use a mortgage calculator in order to come up with a rough estimate of how much you’ll have to shell out every month. 

Yet, while your mortgage payment is often on top of your priority list when it’s time to pay the bills, chances are that you’ve never asked yourself this one important question: “What makes up my mortgage payment?”. 

There’s a reason why mortgage payments end up becoming the whole wince-inducing figure that they are. They have different components, varying conditions, and a whole lot of math. 

While the greatest mortgage calculator in the world might tell you how much you have to pay for every month, it will never tell you what exactly you’re paying for. Surprising, right? 

The final sum may seem like all you need to know, but it most definitely isn’t. If you don’t understand what goes into the final amount that you have to pay each month, then you’re putting yourself at risk of being charged for the wrong amount without being aware of it. 

To help you really understand where your money goes, let’s take a look at five different components of the standard mortgage payments: 


The principal is the total home purchase price subtracting the down payment. It’s essentially your house’s listing price after you’ve paid the down payment. For example, let’s say that you pay $50,000 for a million-dollar house. The remaining principal is then $950,000. 


Interest is an important consideration among the components of a mortgage payment. Lenders and banks certainly won’t lend you money for free. After all, they need to make money too. This is done by charging interest on your loan. When it comes to paying for housing, we calculate interest rate using the principal, the current state of the housing market, and your credit score. 

If you want to minimize your mortgage, make sure that you maintain a high credit score as it will lower your monthly interest by a few significant digits. 

Property taxes 

Property Taxes can vary from state to state and can go higher or lower over time based on the presence of incentives and rising real-estate costs. All the property taxes that the local government collects are usually based on the overall value of your home and property. They are usually allocated to schools, government programs, and the maintenance of public works and highways. 

Mortgage insurance 

If you’ve put down less than 20 percent of your home’s value, then it is mandatory that you be given private mortgage insurance. Private mortgage insurance and general mortgage insurance both function as protection for the lender. As a result, that a buyer decides to default or run. However, if your home’s equity goes part 20 percent of the total market value. Then, you can request to have the PMI and MI lifted accordingly. 

Homeowner’s insurance 

Unlike mortgage insurance, this type of insurance aims to protect the buyer. Thereby should any loss, damages, or defects happen within a home. Compared to a PMI, however, homeowner’s insurance stays constant when your premiums do, making it a much more stable component of your monthly mortgage payment. 

Get Expert Help

Trying to get hold of a right home loan is already a difficult task. Besides, don’t make it even harder by listening to advice from friends and family. Finding the right company or the right kind of loan is not only confusing, but it can also leave you with huge debt. This is why it is important to work with experts.

Aceltis Financial Group is committed to providing excellent customer services. We will walk you through every different situation a loan requires. Accordingly, we will guide you through the major components of a mortgage payment. Above all, we give you an in-depth analysis. As a result, that helps to uncover facts, details, and objectives of the loan. Thus, you are always sure what you are getting. 

Get in touch with one of our lending specialists today by filling this simple online application form.

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