Understanding The Mortgage Payment: What’s Included In It?


Congratulations on becoming a homeowner and having a successful loan application especially with the help of the homebuyer assistance programs Houston! Now it’s time to plan your monthly payments and start transforming your home into what you want it to be.

However, if you are wondering what’s exactly included in your monthly mortgage payment and how much you’re paying for it, you’re in just the right place!

We’ve created this article to help you understand more about what you’ve gotten yourself into and what’s the mortgage payment.

So what is included in a mortgage payment?

Have you ever asked yourself that?

Good Read: 4 ways to pay off your mortgage early.

A mortgage payment has four components and is usually billed every month in the first week. Let’s look at what comprises a mortgage payment and break them down one by one.


It refers to the cost of private or homeowners mortgage insurance for the house you purchased which you are paying for every month.


Secondly, there’s an interest. You’ve probably heard of this many times before. But what is it, exactly? It’s the fee that you are charged with for borrowing money. That’s right. And as you may have noticed, you’ve been given this rate before during the process of your loan application and approval. Included here is a yearly rate called the APR or Annual Percentage Rate. This includes loan origination fees, mortgage insurance, as well as interest.


Thirdly, there’s the principal. Nope. That doesn’t refer to that guy who has an office back at your high school. When we’re talking about mortgage payments, the principal is a part of your mortgage payment which decreases the remaining mortgage balance. The payment percentage which goes to your principal changes as time goes by so don’t go expecting that it’s the same throughout the years.


Lastly, your mortgage payment still has taxes. This is the amount you pay every month for your new home’s property taxes.

And that’s about it for the four components of your mortgage loan. Did you understand everything so far?

Taxes and Insurance Payment Options

Next up, let’s delve into your payment options for the insurance and taxes. These two may be held in an escrow account where it’s going to be included to the mortgage services for your monthly payments or you can directly pay it yourself. So let’s compare these two options.

Escrow Payment

This is where your homeowners or private mortgage insurance bills and your property tax bills are going to be estimated to a monthly amount by the mortgage company. It should be able to cover both of this. Every month, they will collect this from you and include it in your monthly mortgage payment then hold it in the escrow account. As your bills become due, they will use this account to pay your bills.

Self Payment Option

Aside from the escrow payment option, there’s also the self-payment option. Just as it says, you’ll be responsible in paying the homeowner’s insurance and property tax directly every time your bills are due to make sure you have enough funds for these payments since often they’re not monthly.

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