A mortgage payment is made up of five main components, despite the fact that it appears to be a simple loan payment. These are the following:
The principle: This is the amount of money you'll have to pay back throughout the life of the loan.
Interest is a percentage determined by the terms and conditions of the mortgage.
Taxes: This is where you pay your property taxes.
Insurance: You may be required to pay for both homeowner's and private mortgage insurance.
Many lenders bundle taxes and insurance into one large sum for payment at the end of the year, known as escrow. Because this reconciliation is done through Escrow, you may be charged Escrow costs.