The 4 Elements Of Your Mortgage Loan

The 4 Elements Of Your Mortgage Loan

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home loan

Your home loan consists of four elements, two that you are probably aware of, and those are the principal and interest. Two additional elements, taxes and insurance, must also be considered when applying for a loan, secondary elements which can be the deciding factors in whether you get approved for a loan or not.

Which brings us to an important question — if you are in the market for a new home, have you factored in what your property taxes and homeowners insurance premiums will be?

Some things for you to consider:

You may have a general idea how much taxes you’ll be paying annually for your home, but there are factors which can skew these numbers tremendously, even in the same taxing district.

For example, taxes on a three bedroom ranch home could be higher than on a four bedroom colonial, because the width of a ranch home is wider than with a colonial. Other factors that can make a difference include: the age of the home, location, and property size.

Homeowners’ insurance isn’t as easy to figure out today as it was in the past. You may think that $500 annually will cover your insurance needs but discover that your home is in a flood plain, necessitating that you take out expensive flood insurance which is only available through the federal government.

You also discover that since your home is a little too close to the ocean, where all homes have seen rates double, triple, even quadruple since the 2005 hurricane season. What had once been a fairly small expense, home insurance isn’t any longer.

You’ve done your homework finding an excellent mortgage loan. Now go and check out what you’ll be paying for property taxes and homeowners insurance to see if you can really afford your new home.

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Comments

  1. M Moore
    M Moore 22 June, 2008, 17:26

    These elements must be given attention to, especially to ensure financial stability when owning a home. There’s a “pesky” 5th Element that must not be overlooked: Homeowner Fees (aka, association dues or condo fees). I owned a condo once where my monthly fee was HALF of my mortgage payment!

    The only way to get your piece of the mortgage pi is to get a clear layout of what the payment includes*; and don’t let lenders give you that “after-tax” spill. It makes no difference what the end result of homeownership will be while you’re in Survival mode trying to come up with PITI every 4-5 weeks.

    *No surprises, no guesswork with the Mortgage PI Wheel
    created by Smart Designs Publishing, LLC

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