Components Of Perth Amboy NJ Recurring Mortgage Payments

It is important to know components of Perth Amboy NJ recurring mortgage payments to better estimate home ownership costs. The acronym PITI is commonly used to represent the items included, which are principal, interest, taxes, and insurance. All loan payments do not necessarily include each of these. It may vary based on your specific program.

Components Of Recurring Mortgage Payments

Paying Down Principal

Principal is essentially the balance of your mortgage. For a typical loan, a portion of your monthly payment is allocated towards reducing the principal, however there are exceptions. In the first several years of paying a mortgage, only a small portion of the payment actually goes towards principal, but this improves over time.

Mortgage Interest

Interest is the amount charged by banks for use of money they lend. The interest rate is normally a yearly rate but billed in monthly increments according to the balance of your loan. Based on your type of loan, the interest rate will remain the same for the entire life of the mortgage or it can fluctuate at certain intervals.


Taxes are levied by Perth Amboy NJ according to the assessed value of real estate. The amounts are calculated yearly but typically due in installments. Overdue property taxes become a lien on a property and take priority over mortgage liens. Many banks will, therefore, require borrowers to set aside funds into an escrow account to ensure that the bills are paid. Those funds are collected monthly by the lender as part of the regular monthly payment. The lender then pays the taxes directly instead of waiting for the homeowner to do so. It is a method of protecting their interests in a property.


There are different types of insurance for a mortgage. Hazard is usually a requirement whereas mortgage insurance varies based on the specific program. Both may be part of recurring loan payments.

Hazard insurance protects against hazards such as property destruction. Lenders mandate this insurance to protect the collateral on the mortgage. Insurance premiums are payable annually and many will want funds be put into escrow (similar to tax escrow). They will then submit payments to the insurance company directly to ensure the policy remains active.

Mortgage insurance is common for financing with less than twenty percent down payment. It protects the lender against losses. Lenders estimate that they will not recover the full amount owed to them if the property forecloses, so the mortgage insurance covers part of that. Even though it benefits the lender, it is charged to the homeowner.

Knowing Perth Amboy NJ Recurring Mortgage Payments

Not all mortgages are structured the same and therefore not all Perth Amboy NJ recurring mortgage payments will include each of the components above. There can also be other monthly expenses such as condo fees, which are not escrowed by lenders but are a significant factor in calculating total monthly housing expenses. Keep in mind that final figures are based on a specific home and interest rate, so any up-front figures will likely fluctuate.For an estimate of your future loan payments, contact , Enrique Hernandez at Petra Best Realty at (732) 442-1400 or to be referred to a local lender.

Petra Best Realty, LLC
329 Smith Street
Perth Amboy, NJ 08861

(732) 442-1400 Phn
(732) 442-1480 Fax
(732) 841-7029 Cell

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