What Makes Up a Mortgage Payment?

When exploring Rexburg Idaho Real Estate, one of the most critical factors for potential buyers to understand is the composition of a mortgage payment. Whether you’re considering cozy starter homes or larger properties, knowing how your monthly payment is calculated can help you budget effectively and make informed decisions about which property to purchase. Let’s break down the four main components of a mortgage payment: principal, interest, taxes, and insurance (often abbreviated as PITI).

1. Principal

The principal is the amount you borrow from a lender to purchase your home. For example, if you find a house for sale in Rexburg listed at $300,000 and you put down a $60,000 deposit, the remaining $240,000 becomes your principal loan amount. Over time, your payments reduce this balance, increasing your equity in the home.

2. Interest

Interest is the cost of borrowing money from the lender. It’s calculated as a percentage of the loan amount and varies based on factors like your credit score and current market rates. The interest portion of your mortgage payment is higher at the beginning of your loan term and decreases as the loan matures. When considering Rexburg homes for sale, it’s a good idea to shop around for the best interest rates. I have lender's that I work with frequently and trust to take care of my clients. Reach out to me to get my list of recommended lenders.

3. Taxes

Property taxes are levied by local governments to fund public services like schools, roads, and emergency services. The amount you pay is based on the assessed value of your property and the local tax rate. In Rexburg, Idaho, property taxes are relatively moderate compared to national averages, making the area attractive for buyers searching for houses for sale in Rexburg and nearby areas.

4. Insurance

Homeowners insurance protects your investment by covering damages caused by events like fire, theft, or natural disasters. Depending on your location, you may also need additional coverage, such as flood insurance. Insurance premiums are typically included in your mortgage payment and held in escrow to ensure timely payments. A skilled Realtor like myself will inform you which properties are within a floodplain.

Additional Costs to Consider

In some cases, your mortgage payment may also include:

• Private Mortgage Insurance (PMI): Required if your down payment is less than 20% of the home’s purchase price.

• HOA Fees: If you purchase a home in a neighborhood with a homeowner’s association, you will likely have to pay recurring fees that fund community expenses like road maintenance.

How Understanding PITI Helps You

Understanding the breakdown of your mortgage payment allows you to:

• Set a realistic budget for your home search.

• Avoid surprises when closing on a home.

• Compare the total costs of different properties in the Rexburg market.

Mortgage calculators like this one from ICCU can be a great place to start when estimating your total monthly payment for a given property: https://www.iccu.com/loans/home-loans/?gad_source=1#home-loan-calculator. If you’re ready to start your home buying journey, give me a call to find the perfect fit for your budget and lifestyle. With a clear grasp of your mortgage payment, you’ll be well-prepared to make your dream of homeownership a reality!