Buying a Home – Understanding the Financial Benefits and Expenses of Home Ownership
Posted by admin in Financial News, Home Financial on January 21, 2012
Many people think that being able to afford a home means to simply afford a loan payment. Home ownership, however, is much more than just a monthly loan payment. When deciding to buy a home, there are several different monthly expenses, besides just a loan payment, to account for as well as a few benefits that can help make home ownership more affordable.
The most important expense to be familiar with when buying a home is the mortgage payment. A mortgage payment typically consists of four components – Principal payment, Interest payment, Property Tax payment, and Insurance payment. These four components of a mortgage define what is referred to as PITI (Principal, Interest, Tax, and Insurance).
The principal and interest payment of your mortgage are the portions of your mortgage payment that are paid to your bank on a monthly basis to repay your loan. Principal is the portion of your monthly mortgage payment that goes towards paying down your home loan. This portion of your mortgage payment is what builds equity in your home while Interest is the portion of your monthly mortgage payment that is the fee that you pay to your bank for borrowing money. The amount of interest that you pay depends on your loan’s outstanding balance and interest rate. Read the rest of this entry »