Understanding your monthly mortgage repayment involves more than just the interest rate. Several factors contribute to the overall cost, significantly impacting your budget. Let’s break down these components:
Private Mortgage Insurance (PMI) is typically required if your down payment is less than 20% of the home’s purchase price. PMI protects the lender if you default on your loan. The cost varies based on your loan amount and credit score but can add hundreds of dollars to your monthly repayment.
Property Taxes are another significant expense. Lenders often collect property taxes with your monthly mortgage repayment, holding the funds in an escrow account. They then pay your taxes annually on your behalf. Tax amounts can change due to rate adjustments or property value reassessments.
Property Insurance is mandatory for homeowners. It protects you and the lender from financial losses due to fire, natural disasters, or other covered events. Similar to property taxes, lenders usually include insurance in your monthly repayment and manage the payments through an escrow account.
HOA Fees apply to homes within planned communities offering amenities like pools or landscaping. These fees, ranging from $100 to $200 or more per month, cover community maintenance and services. It’s crucial to factor HOA fees into your housing budget when considering a property in such a community. Understanding all these costs helps you accurately estimate your total monthly housing expense and use a 30-year fixed interest rate calculator to determine affordability.