If you've never bought a home before, you may be surprised to learn that there's a lot to know about mortgages.
In its simplest form, a mortgage is a type of loan. It's used for buying a home, and it's repaid in monthly installments--usually over 15 to 30 years.
According to Business Insider, the payment you finally end up paying for your mortgage actually covers a number of things.
The principal is the amount the lender gives you upfront. If you borrow $200,000 from the bank, then the principal is $200,000. A little of this is paid back each month.
But you'll also pay interest--the cost of your loan. The interest is built into your monthly payment.
You'll also pay property taxes, which are based on the assessed value of your home, and your mill levy--which varies depending on where you live.
Homeowners insurance is mandatory, too, and is built into the payment. In 2017, the average annual policy cost $1,211.
Finally, you'll also probably have to pay for private mortgage insurance, or PMI, costing from 0.2% to 2% of your loan principal per year.
