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PITI Mortgage Loans Are So Expensive


If you are in the market for a home mortgage, first take a moment to be grateful that your financial situation is as good as it is.  Home ownership is becoming an increasingly unattainable dream.  Home mortgage loans are the biggest debt that most people incur in their lives, and the value of the house you are buying with the mortgage loan is only one of the reasons that it is so expensive to buy a house.  Some of the factors that influence the affordability of a home mortgage loan have to do with your individual financial circumstances, while others relate to market-wide economic forces.  All of this means that applying for a mortgage loan takes months, if not years, of preparation to get your finances in order so that you can qualify for a loan for the property that you want to buy.  To find out more about the inner workings of home mortgage loans, contact a Washington, D.C. real estate lawyer.

What Is the Most Expensive Part of a Mortgage?

When you are making payments on a home mortgage, all of the components are bundled together into one monthly payment.  Your mortgage loan actually has four parts, though, and if you read your statement carefully, you will see how much you have paid toward each one.  The four elements of a home mortgage, which can be represented by the acronym PITI, are as follows:

  • Principal is the amount of money you borrowed. It is the sale price of your house minus your down payment.  If you have a 30-year mortgage, then only about half of the money you pay each month goes toward the principal.
  • Interest on a mortgage is calculated each month as a percentage of the outstanding principal balance. In a fixed-rate mortgage, the interest rate stays the same until you either pay off the mortgage in full or refinance it.  In an adjustable-rate mortgage, it can change according to nationwide interest rates.
  • Taxes in the context of a mortgage statement refers to property taxes. The property taxes are based on the assessed value of your house, which changes each year.  Many mortgage servicing companies divide the year’s property taxes into 12 monthly installments.
  • Insurance in the context of a mortgage statement refers to homeowner’s insurance. Many lenders require the borrower to buy mortgage insurance.  This way, if the house gets damaged, the homeowner can repair it affordably, and there is less risk that the borrower will abandon the house and the mortgage.

How Is Commercial Real Estate Different?

The elements of a home mortgage are the same whether it is for an owner-occupied unit, an investment property, or a multi-unit rental building.  When you are getting a loan as a landlord, instead of as a homeowner, your financial obligations are more of a moving target, because you can buy and sell frequently or invest jointly with other companies.

Contact Tobin O’Connor Ewing About Real Estate Transactions

A Washington, D.C. real estate attorney can help you strategize about applying for a home mortgage.  Contact Tobin, O’Connor, and Ewing in Washington, D.C. or call 202-362-5900.



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