Understanding Mortgages: What’s Included In A Mortgage Payment

Mortgage Payment

Are you ready to become a homeowner? Well, thinking of having your place may be exciting, and now you’re wondering what your monthly mortgage payment is and what’s in it. How much is it?

For all of your mortgage questions on FHA Loans Corpus Christi, we are here to help you and provide you details on what you should know.

What’s In A Mortgage Payment?

Mortgage payments are usually billed at the beginning of every month. It has four components including the Principal, Taxes, Interest and Insurance. Let’s discuss each of these.


The principal is part of your monthly payment which reduces your mortgage remaining balance. You’ll then find out that the percentage of your payment which usually goes to your principal changes over time.


The fee that’s charged when you are borrowing money is called the interest. How is this amount determined? It’s often during the approval and loan application process. You will also hear a lot about the Annual Percentage Rate (APR). In a nutshell, this is the yearly rate which includes the loan origination fees, mortgage insurance, and interest.


The taxes is defined as the property taxes’ monthly cost for the house that you purchased.


This is the private and homeowners mortgage insurance monthly cost for the house you bought.

Taxes and Insurance Payment Options

Your payment insurance and taxes portion are usually included in the monthly payment to your mortgage servicer. It is generally held in an escrow account or paid to the homeowners directly.

Self-Payment Option

In here, you won’t need to include the estimated amounts in your monthly payment. So instead, you’ll have to pay the property tax and the homeowners insurance when your bills are already due. As such, always ensure that you have enough funds to pay these since often these are not every month.

Escrow Payment Option

With this payment option, it’s the mortgage company who will get your homeowners or private mortgage insurance bills and property tax bills, as well as estimate the monthly amount to cover these. Not only that, but you’ll also have to pay for these as part of your monthly mortgage payment. Your mortgage company will hold it in an escrow account. As your bills become due, they will pay the said bills from this account.

So which one should you choose? A lot of borrowers choose the escrow account option. It saves you the trouble of setting reminders and having you go to all the trouble of paying the bills when they’re due. With the monthly escrow payments, you usually pay an estimated amount, and annually, your mortgage servicer will adjust this amount. Aside from that, your money in your escrow account also earns a small interest.

Also Read: How to Calculate Your Mortgage Payment: Fixed, Variable, and More


Now that you know a lit bit better about your mortgage payments, you can estimate your monthly expenses easier. We hope the above details will guide you in your journey to buying your dream house. Did you like the article? If you have any questions, let us know in the comments below.