If you use any of the mortgage calculators to calculate what your mortgage payment will be, they will do a great job of calculating what the principal and interest will be on your loan.
But did you know that there is more to your monthly mortgage payment than just your principal and interest?
In mortgage-speak, you will sometimes hear the acronym "PITI" which stands for Principal, Interest, Taxes and Insurance. While many people focus on trying to save money with getting the lowest rates and fees on their loan, don't overlook the opportunity to save possibly hundreds of dollars on your loan with taxes and insurance as well.
Principal and Interest Principal and Interest is the amount of money that you pay towards the principal balance of the loan each month and the interest that is associated with that principal at a given interest rate. The principal and interest portion of your payment is just s simple math calculation that arrived at using the interest rate of your mortgage note, the principal amount of your loan and the number of years your mortgage is amortized for.
Taxes Here is a relatively little-known piece of information - you may be able to save money on your annual tax assessment if the value of your property has went down down. If your property value has gone down and you think that the county assessors office has not accurately reflected this in your tax bill, there are processes in place where you can appeal the amount of taxes that are to be due. Check with your local county assessors office to see what the appeals process is if you want to contest the assessed value of your property because you think it has went down recently.
Insurance There are two types of insurance: homeowners insurance and mortgage insurance. The best way to save money on your homeowners insurance is to shop around using a homeowners insurance quote service that will possibly help you pay less each month by finding a provider who can give you the same coverage you are getting now for less. You might be surprised how much you can save just by shopping around a little bit for the best deal.
Mortgage Insurance. Mortgage insurance is the money that the lender requires you pay if you are below a certain loan-to-value ratio on your home. The best way to save on mortgage insurance is to work toward getting enough equity in your property that the lender will no longer require it on your loan. How much you pay for mortgage insurance has to do with how much equity that you have in the property -- more equity means that you will pay less for mortgage insurance. If you put as little down as possible, you will pay more for mortgage insurance.
Remember - when shopping for a mortgage, there is more to saving money each month than just getting the lowest “PI” possible — don’t forget to shop for the “TI” part as well, you might be surprised how much you can save!