What Goes into a Mortgage Payment

If your mortgage is escrowed, your monthly payment will include more than just the loan payment.

Woman manages finances at home with laptop.

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. Here's a breakdown of the key components.

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 and more off your loan and less and less in interest.

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

Property Taxes
Property taxes are based on the value of your property, and that number is affected by factors including the size and condition of your home as well as your property’s location.

Wisconsin’s average property tax rate is around 2 percent of your property’s value. So, if you own a home in Madison 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 pool or wood-burning stove. Annual premiums generally range from $400 to $1,500.

Private Mortgage Insurance (PMI)
If you’re planning on making a down payment of less than 20 percent, 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. For example, with a good credit score and a 10 percent 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.

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