What's included in my monthly payment?
The majority of your monthly payment is applied to Principal, Interest, Taxes and Insurance (PITI). In the early years of your loan, Interest will make up the bulk of the mortgage payments. The percentage of your payment that is applied to principal will gradually increase over the years as the loan is paid off. Payments for taxes and insurance will go into an escrow account. When those payments are due, the lender will disburse the funds. The amount of these payments can affect the monthly payment required for the loan, even if it is a fixed rate loan. Increases in insurance costs or a jump in your home’s value could cause taxes or insurance to rise, which in turn would cause your monthly payment to increase.
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