Friday, March 16, 2012

The Mortgage Payment Breakdown

If you are considering buying a home I recommend reading/watching a series of articles/videos that I discovered while writing this post (here).

There are so many factors that go into determining your particular mortgage payment. The same price house, with the same interest rate will not be the same in every state.

When we first started looking for houses it was easy to get excited about all the affordable houses we found. And we were excited! I know you are, too. We would search and other housing websites to see what was available in our "supposed" price range and become giddy at how seemingly cheap houses were compared to where we lived. You have seen them too. You find a house you like and over in the corner they give you a number of what the approximate mortgage will be.

That LOW number only to tells a small portion of the story. The low number is the one that hooks you and gets you thinking you can do this. Your mortgage payment will not be that low.

Many of those sites do not have accurate information, or any, regarding the current property taxes assessed on that particular home. Depending on your state, property taxes could represent a significant portion of your mortgage.

Since I have been using myself as an example, here is what our current mortgage payments look like  5.5 years into our mortgage.

Monthly payment:   $1,167
Principle:  $308.64
Interest:   $539.80
Property Taxes:   $260
Insurance (property/flood):   $60

When I look at the total amounts we have paid over the years (5.5) this is how they breakdown into percentages

57.37% Interest - this is money that you pay the bank for the pleasure of using their money instead of your own to gamble with.

20.26% Property Taxes - this is the amount you pay to your city/county that funds schools, local projects, etc. - unlike a fixed rate mortgage, your property tax may increase every year like ours did.

17.32% Principle - this is your real contribution that becomes equity assuming your house is still worth what you bought it for.

5.05% Homeowners Insurance/Flood Insurance - this is what the bank requires you to have to protect their investment should something happen to the property.

Having a mortgage of any size is in reality using someone else's money to invest with the hopes that the investment pays off. You assume all of the risk and you pay a hefty price for that arrangement.

Next: Rent To Own = Mortgage

1 comment:

  1. This calculator gives you a detailed breakdown of your mortgage and calculates a payment schedule over your full amortization. Best PPI Advice


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