What's in a Monthly Mortgage Payment?

Your monthly mortgage payment is made up of 4 different parts - principal, interest, taxes and insurance. We've broken down each one to help you understand where your money is going.

Principal

This is the amount you borrow. Part of your monthly mortgage payment goes toward paying down your principal.

Interest

This is the cost of borrowing your principal loan amount. It's usually shown as a percentage of your principal and goes down as the principal is paid off. The process of paying off your mortgage over time is known as amortization.

Learn more about mortgage amortization
HOW PRINCIPAL AND INTEREST IN A MONTHLY PAYMENT CHANGE OVER TIME

Principal

Interest

Based on a monthly payment of $1074*

Years:
1
15
30
*Payment estimated for a 30-year fixed rate loan of $200,000 at an interest rate of 5%. For illustrative purposes only.

Property taxes

This tax is based on the value of your home and is usually collected by your local government once or twice a year. In some cases, you may be asked to pay property taxes every month using an escrow account.

What's an escrow account? What's an escrow account?

Homeowners insurance

Homeowners (or hazard) insurance protects you in case of any damage to your home. You'll usually be asked to buy insurance equal to your home's value, but if you live somewhere that's prone to natural disasters, you may need to buy additional policies due to higher risk.

Mortgage insurance

Mortgage insurance from a licensed provider is usually required if you make a down payment of less than 20%. This ensures coverage if you miss a monthly payment or default on your mortgage.

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