Home Loans
What a mortgage costs each month
The four parts of a monthly payment, what moves each of them, and how to compare loans by their total cost.
Key takeaways
The payment has up to four parts
Tax and insurance follow the home
A larger down payment can remove mortgage insurance
Compare total cost, not only the monthly figure
The rate is only one part of what a home loan costs. Your monthly payment has up to four parts, and it helps to see each of them before you choose a home or a lender.
1. Principal and interest
This is the loan itself. Early payments are mostly interest; over the years more of each payment reduces what you owe. A longer term lowers the payment and raises the total interest.
2. Property tax and home insurance
Both depend on the home, not on the loan. Many lenders collect them with the payment. Ask for last year's figures for the home you like and add them to your budget.
3. Mortgage insurance
With a small down payment, a lender may ask for mortgage insurance. It usually ends once you own a set share of the home, so a larger down payment can remove it from the start.
4. What you can change
A larger down payment, a shorter term, a lower rate or a small extra payment each month all reduce the total cost. Try each of them in the mortgage calculator and compare the totals, not only the monthly figure.
This is a demo article with invented figures.
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Written by
Elena Marsh
Home loans editor
