What to Know About Having a Mortgage

You might think that your mortgage payment is like rent—it just pays the cost of the housing. Actually, most mortgages are designed to pay four different things:

• Principal—the part of your monthly mortgage payment that goes toward building equity—or ownership—in your house
• Interest—the amount you agreed to pay when you signed your mortgage
• Taxes—one-twelfth of your annual property tax bill
• Insurance—one-twelfth of your annual mortgage insurance and homeowner's insurance premiums

That's why mortgage payments are sometimes called PITI—principal, interest, taxes, and insurance.

The size of your mortgage payment is based on a number of factors, including the down payment, the size of the mortgage loan, the interest rate, the length of the loan, and the payment schedule.

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