Principal, interest, taxes and insurance explained, plus how a down payment changes the amount you borrow.
A mortgage payment includes principal and interest. Many lenders also collect property taxes and homeowners insurance through escrow, and some loans add mortgage insurance, so the full monthly cost can exceed principal and interest alone.
A larger down payment reduces the amount borrowed and can lower interest costs. Rates and terms vary by lender and borrower, so request written estimates from several lenders.
| Term | Meaning |
|---|---|
| Escrow | An account holding funds for taxes and insurance |
| Down payment | The upfront amount you pay toward the home |
| Loan Estimate | A standard document lenders use to show loan terms |
No. It estimates principal and interest only.
It depends on your finances and loan type. Compare several scenarios.
Principal, interest, taxes and insurance explained, plus how a down payment changes the amount you borrow.
What each payment covers, why early payments are mostly interest, and how term length changes the total cost of a loan.
What each payment covers, why early payments are mostly interest, and how term length changes the total cost of a loan.
Disclaimer: This article is for educational purposes and is not personalized financial, investment, tax, legal, or lending advice. Read the full disclaimer.
