Southern California Monthly Home Loan Payments

It is important to understand what is included in Southern California monthly home loan payments for budgeting purposes. The acronym PITI is commonly used to remember the items, which are principal, interest, taxes, and insurance. All loan payments do not necessarily include each of these. It may vary based on your specific mortgage.

What Is Included In Monthly Home Loan Payments

Principal Payments

Principal represents the balance of your mortgage. For most loans, a portion of your loan payment every month is allocated towards lowering the balance, however there can be exceptions. In the first few years of making payments, very little of the payment actually goes towards principal, but this improves over time.

Mortgage Interest

Interest is the fee billed by mortgage companies for use of money they lend. The interest rate is normally a yearly rate but assessed in monthly increments calculated on the balance of your loan. Based on the type of loan, the interest rate can stay the same for the entire term of the loan or it may fluctuate at certain periods of time.

Municipal Taxes

Taxes are levied by Southern California according to the assessed value of a home. The amounts are calculated yearly but traditionally due in installments. Overdue property taxes become a lien on a property and take priority over mortgage liens. Many mortgage companies will, therefore, ask homeowners to set aside money into an escrow account to guarantee that there are sufficient funds to pay the bills when they are due. Those funds are collected monthly by the lender as part of the regular mortgage payment. The lender then pays the taxes directly instead of waiting for the homeowner to do so. It is a way of protecting their investment.

Insurance

There are two types of insurance that may apply to a property. Property is generally a requirement while mortgage insurance varies based on the specific loan. Both may be part of monthly loan payments.

Property insurance covers damages. Mortgage companies require this insurance since the home is collateral on the loan. Insurance premiums are due annually and many will require monthly contributions into escrow (similar to tax escrow). They will then pay the premiums from that account to ensure the policy does not lapse.

Mortgage insurance is common on mortgages with low down payments. It protects the mortgage company against losses. Lenders estimate that they will not recover the full amount owed if it forecloses, so the mortgage insurance covers some of their loss. Even though it benefits the mortgage company, the homeowner can be responsible for the premiums.

Knowing Southern California Monthly Home Loan Payments

Not all financing is structured the same and therefore not all Southern California monthly home loan payments will contain all of the components above. There may be additional monthly charges such as condo fees, which are not escrowed by mortgage companies but are an important consideration in calculating total monthly housing cost. Remember that exact amounts are determined by a specific property and interest rate, so any up-front figures will likely change.For an estimate of your possible mortgage payments, contact , Matthew Rapoport at Homes Inc. at (213) 334-4141 or [email protected] to be referred to a local lender.