What's In a Mortgage Payment?

Usually, your monthly mortgage payment is made up of four parts: principal, interest, taxes and insurance (PITI), but it can also include maintenance expenses, such as condominium homeowners' association dues. The principal is the actual amount you borrow.

The interest rate is the fee charged to borrow that amount of money over time. In addition, a monthly amount may be collected and held in a separate escrow account to cover property taxes, homeowners' insurance and mortgage insurance.

Your lender uses the money in the escrow account to pay your tax and insurance bills, as they come due.

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