On a mortgage, what’s the difference between my principal and interest payment and my total monthly payment?

Answer:

The difference between your principal and interest payment and your total monthly payment is that your total monthly payment usually includes additional costs like homeowners insurance, taxes, and possibly mortgage insurance

The principal and interest payment on a mortgage is probably the main component of your monthly mortgage payment. The principal is the amount you borrowed and have to pay back, and interest is what the lender charges for lending you the money. 

For most borrowers, the total monthly payment you send to your mortgage company includes other things, such as homeowners insurance and taxes that may be held in an escrow account. If you have an escrow account, you pay a set amount with every mortgage payment for these expenses. Your mortgage company typically holds the money in the escrow account until those insurance and tax bills are due, and then pays them on your behalf. If your loan requires other types of insurance like private mortgage insurance, these premiums may also be included in your total mortgage payment as well. 

Here’s how it works:

Principal + interest + mortgage insurance (if applicable) + escrow (homeowners insurance and tax) = total monthly payment

If you live in a condo, co-op, or a neighborhood with a homeowners’ association, you will likely have additional fees that are usually paid separately.


Was this page helpful to you?

Note: Do not include sensitive information like your name, contact information, account number, or social security number in this field.

The content on this page provides general consumer information. It is not legal advice or regulatory guidance. The CFPB updates this information periodically. This information may include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.

Read full answer Hide full answer