After buying a home for sale in Irvine, the payment you make every month to cover your mortgage bill breaks down into various components. Depending on the terms and conditions you agreed to at the closing table, your mortgage payment may include additional items beyond what you borrowed.
For the most part, the mortgage lender or the servicing company that takes your payments will try to keep them at the same amount every month through an amortization strategy. Even though your initial payments will mostly cover interest and your final payments will be mostly destined to pay off the remaining principal, the lender will calculate a comfortable plan so you can make uniform payments throughout the life of the loan.
Here’s a breakdown of what your mortgage payment might look like:
This is the original amount you borrowed, which was determined by a loan-to-value ratio. If the principal represented more than 80 percent of the value of the property at closing, your mortgage payment will have a few more components.
This is the cost of borrowing money, and it is charged on an annual percentage rate basis. If you agreed to a fixed rate of interest, this amount will not change unless you refinance. If you are paying off an adjustable rate mortgage, this amount may change after one, three, five, or ten years according to the loan terms.
Unless your loan to value ratio is very low, the lender will collect some escrow items from you. Property taxes are collected monthly so you do not have to worry about when your tax bill is due.
This is another escrow item your lender collects each month for the purpose of paying the annual homeowners insurance premium. This amount may increase or decrease depending on market rates.
Private Mortgage Insurance
If your loan to value ratio was high at the closing table, the lender will expect you to pay an insurance premium to protect against default. Depending on the terms of your mortgage, this component may be withdrawn once your loan to value ratio drops to 80 percent.
Homeowners Association Fees
Your lender or servicing company may also collect HOA fees if you purchased a condo for sale in Irvine or live in a gated community.
If you’re ready to buy a property in Irvine, make sure you also find a real estate agent in Irvine. Having a local agent can increase your chances of scoring the home of your dreams. Get in touch with local Irvine agents today at 714-454-6304 to learn more.