What does my mortgage payment cover?

Most mortgage payments have four parts that your money goes toward:

  • Principal – the repayment of the amount you have actually borrowed for your home.
  • Interest – the payment to the lender for the money you have borrowed.
  • Homeowners Insurance – A monthly amount to insure property against loss from fire, smoke, theft other hazards.
  • Property taxes – Annual city/county taxes assessed on the property.

During the life of the loan, you will pay more in interest than you will in principal in the first stages of the loan. But, it will change in the final years of the loan where you will pay more in principal than in interest.

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