Velocity Finance - Mortgage

Mortgage Dues

A mortgage is a form of financial aid that will enable you to purchase your home. The home you live in acts as collateral for your lender in the case of your neglected payments - but you already knew that. You know a home mortgage is a loan, and you know you need to pay that loan back. But did you know there is more to your mortgage than the loan amount and the interest? Do you know what that interest entails? Probably not.

Your mortgage dues - PITI

If you remember a single word when it comes to your mortgage loans, remember this one - PITI. PITI is an acronym for Principal, Interest, Taxes, and Insurance, and makes up everything you are paying for when you take out a mortgage:

the loan Principal is the actual amount you are getting to buy your home. If you have a $25,000 down payment and are looking to purchase a $225,000 home, your loan principal will be $200,000, the remainder after the down payment.
Interest is the cost of the mortgage, and will vary depending upon your qualifications and the deal you make with your lender. A bad credit mortgage will have greater interest because of your increased financial risk, while an adjustable rate mortgage will have a lower rate due to the added financial risk you assume. Your lender also has the power to charge whatever arbitrary rate you will be willing to pay, so its important to know not just your qualifications but similar offers from competitive lenders. You can also buy down your interest by paying "points" to your lender.
Taxes are taxes, a home is a purchase, and any purchase will have associate taxes. With mortgages your taxes will include land, service, and state taxes, as well as whatever taxes are required by law. Taxes are sometimes incorporated into the mortgage itself, other times not.
Finally, insurance refers to both the litany of homeowners insurances - fire, water, weather, etc. - and any mortgage insurance you might be forced to pay if a.) you have a poor credit history or b.) you lack a substantial down payment.

Thats PITI, and that is the overall cost of home ownership. If at any time in your mortgage experience you feel as if you are paying too much or more than you can afford, you can always look into refinance mortgage opportunities to see if you might get a better deal elsewhere. Lenders are always more than happy to take your business away from a competitor at the cost of offering you a better rate, lower fees, or ignoring insurance.

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