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Monthly Payment Distribution
Monthly Mortgage Payment Components:
The monthly mortgage payment is primarily derived from the following components:
—The amount borrowed from the bank. This is usually the price of the home.
—The percentage of the loan amount that is paid upfront. This reduces the amount of money that is required to be paid back over time.
—The interest rate of the loan.
—The amount of time over which the loan will be paid back. Usually 15 or 30 years (180 or 360 months).
Annual Property Tax
—Every property owner is required to pay a tax to the governing authorities. Although there may be slight variations across states, the average rate of annual property tax in the US is between 1-4% of the property value.
Annual Home Insurance
—It is an insurance policy that protects a homeowner from possible accidents to the property, although it may include personal liability coverage – a form of protection against lawsuits emanating from injuries sustained on and off the property. The lender will require the owner purchase home insurance. This will be included in the mortgage.
Annual HOA Fee
—The property owner is often required to pay a certain amount to an organization that oversees the maintenance and improvement of the neighborhood the home is located in. The value is usually less than 1% of the property value annually.
Private Mortgage Insurance
—It is an insurance policy that protects the mortgage lender if the borrower fails to repay the mortgage. It ranges from 0.3-1.5% of the loan amount annually, and the exact price depends on factors like the credit of the borrower, the size of the loan, and down payment. If a down payment of less than 20% is made, then PMI will be added to your mortgage payment.
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