Your Mortgage consists of Principal, Interest, Taxes, and Insurance (and sometimes Mortgage Insurance).
Principal: The amount you borrowed to buy the home. Your principal payoff will increase as you get closer to the pay-off of your loan.
Interest: The cost of borrowing the money. This is the fee that you’re charged by a lender for borrowing this money, a rate that’s set during the loan approval process. The best way to view interest is in APR (Annual Percentage Rate) format, which includes mortgage insurance and any other fees.
Taxes: The amount the county charges to own the property. This is your property taxes. This can be paid through an escrow account or directly when your property tax statement is due. Taxes for Minnesota properties must be filed by May 15 (1st half of the year property taxes) and by October 15 (2nd half of the year property taxes). The exception to this is if it is on a holiday or weekend and then it would be due the next business day.
Insurance: The premium to insure the home against disaster. Home Insurance that is setup through your Insurance provider prior to closing. Your insurance needs will be different based on the property type and your individual needs. This can also be paid through an escrow account or directly depending on how your home is financed.
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Mortgage Insurance: The premium charged on certain loans to protect the lender against default. Your lender and loan type will dictate if this will be part of your mortgage. *Work with your lender, insurance agent, and real estate agent if you have questions.
