What Goes into a Mortgage Payment?

Chances are your monthly mortgage payment will include more than just money for your house. If your mortgage is escrowed, you’ll be making payments toward several requirements each month as part of your monthly mortgage payment.

Here's a breakdown of the key components.

Mortgage Principal & Interest

Principal is the money that’s paid toward your original loan balance.

Interest is the amount your lender is charging you for the loan.

During the first few years of your mortgage, you’ll be paying a significant chunk of interest each month. Over time, you’ll see that ratio shift as you pay more of your loan’s principal and less in interest.

Your principal and interest will be combined into one payment amount. You can review your payment plan (called an “amortization schedule”) when you get your mortgage to see exactly where your money is going.

Property Taxes

Property taxes are based on the value of your property. That number is affected by things like the size and condition of your home, your property’s location and the average market value of homes for that area.

Wisconsin’s average property tax rate is around 2% of your property’s value. So, if you own a home in Madison that has been assessed at $250,000, you can expect to pay around $5,000 per year in property taxes.

Homeowners Insurance

Another must-have, homeowners insurance protects you and your property. Your insurance may include coverage for disasters such as:

• Fire or high winds
• Burglaries
• Water damage
• And more

Insurance may also protect you from liability if others are injured on your property.

Insurance premiums vary based on the age and location of your home, as well as high-risk factors like owning a swimming pool or wood-burning stove. Annual premiums generally range from $800 to $2,000.

Private Mortgage Insurance (PMI)

If you’re planning on making a down payment of less than 20%, you’ll probably need PMI. PMI costs vary based on your credit score and the size of your down payment, but it’s generally anywhere from 0.3% to 1.5% of your loan amount per year.

Here’s an example:

With a good credit score and a 10% down payment on a $250,000 home, you might expect to pay around $82 per month in PMI. If you need extra help making a down payment on your home, you may want to consider exploring down payment assistance programs that are available in your area.

Ready to buy? Get in touch with our local mortgage lending experts or get preapproved. 

Still researching? Explore our Mortgage Learning Center.