Are You Paying Additional Fees for Your Mortgage?

James Henry Abrina By James Henry Abrina, 2nd Sep 2010 | Follow this author | RSS Feed | Short URL http://nut.bz/z1rt3xpl/
Posted in Wikinut>Money>Mortgages

How sure are you that your payment only covers what your house is worth? If you are paying many charges, can you cut them off?

Introduction

Getting a debt through mortgage that you will pay for a few decades is a serious matter. Not being able to comply with the contract may leave you a loser in the end. All your hard works and hard-earned cash can just go futile if you cannot pay the debt up to the very last cent. In spite of this fact, millions of people still avail a mortgage loan to have their dream homes and for the security of their families. Monthly amortizations may be high and the duration of the debt payment may be long, but the benefit of the assistance that you can get through this kind of financing can outweigh any disadvantages.

Nevertheless, getting equipped with the knowledge of what you are paying for is an advantage in the business. At least you know what to expect and what to pay attention for. You may also have some options if the lender will allow you. Here are the elements of a mortgage debt that you will pay most probably for the next 15 to 30 years. Remember that the key term here is PITI.

1. Principal

This is the exact price or appraisal of the estate itself, without the add ons, that you will purchase. This mainly comprises the amount that you will pay in the course of several years. However, the first to second quarters of the entire payment scheme are most probably non-principal payments. Yes, you will pay not the principal but only the interest rate for the first few years. So technically, you are not even paying for the house yet but only the lender's income. This is one of their way of assuring the return on their investment.

You do not have to worry though. This is only the distribution of payments throughout the whole duration. All in all, you are still paying your dues so the entire contract is still in effect. You are also secured by the federal law, same as how they are securing themselves.

2. Interest

This may vary according to the lending company (bank) and the state. A house in New Jersey is never near the price of a house in New York City. The more secured the state is against financial meltdowns, the higher the interest. You are most likely to pay the interest first than what the house is really worth.

3. Tax

Basically everyone and every property needs to be paid for taxes. The tax will also vary according to the size of the house and lot. You should be aware though that tax is not just a part of the mortgage, but of your responsibility under the flag. You will still pay for it even if you already finished paying the mortgage loan, but this time directly to the IRA.

4. Insurance

Some lenders will give you the option to avail one or not. However, most of the time this is a requirement. This is a way of securing the property from calamities and disasters like flood, fire and theft.

Tags

Bank, Cash, Debt, Finance, Housing Loan, Insurance, Interest, Loan, Money, Mortgage, Principal, Tax

Meet the author

author avatar James Henry Abrina
For the improved/edited versions of the articles here and for my new posts, please visit the following sites:

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Comments

author avatar Md Rezaul Karim
23rd Jan 2012 (#)

Nicely written article.

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