What else you NEED to KNOW.
By: Leanne Brittain
Owning a home comes with a lot of perks, such as getting to cutesy it up with all the latest trends, planting beautiful tulips in the spring, along with more serious topics like the deduction for your mortgage interest and property taxes. Buying a home is one of the biggest, if not the biggest, financial decisions most people will EVER make.
There are four parts that make up your monthly mortgage payment and this is referred to as PITI:
1. Principal
2. Interest
3. Taxes
4. Insurance
Your mortgage includes the first two items (your principal and interest payment), while you’ll typically manage property taxes and homeowner’s insurance premiums through your escrow account. While your mortgage (PI) won’t change, the escrow amounts will fluctuate as tax and insurance rates fluctuate which will change your mortgage payment (PITI).
A mortgage provides more stability than rent, which is controlled by someone else. Unless you change the terms of your mortgage, then you know what your payments will be now and in the future, which allows you to set your budget accordingly.
Other expenses you’ll need to account for include routine maintenance, such as landscaping, and HOA fees. You should also keep in mind that there’s no landlord to count on if the roof starts leaking, or the AC goes out in the middle of the July heat and humidity. As a renter, these things are a nuisance to deal with but as the homeowner you’ll need to have an emergency fund to take care of these things when they come up…and they will occasionally come up.
Two of the most common ways to do this are by either putting more of your discretionary income toward a savings account or by putting less money down during the home purchase. Just remember, a lower down payment can increase your monthly payment.
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Leanne Brittain is the Managing Broker of Nest Realty Morganton. Having made more than 15 moves gives her unique insight into the buying and selling processes, including relocation. To learn more about Leanne, visit her agent page.