In fact, a monthly mortgage payment is made up of PITI, but you may have to pay other mortgage-related fees, such as private mortgage insurance and/or housing association fees.
Private mortgage insurance (PMI)
PMI is not intended to protect you. It is designed to protect the lender from you, at least against the possibility that you may or may not be able to make your mortgage payments. Sure, you never would be, but the lender doesn’t care. If your deposit is less than 20% of the price of the accommodation, a PMI will be applied. This is another reason to save 20% on the deposit.
Lenders generally calculate the PMI by taking 0.5 to 1.5% of your principal and applying it to your mortgage payment. For example, a 0.5% PMI payment for a loan of $ 180,000 would increase your payment by $ 900 per year or $ 75 per month. $ 900 more per year! Think about what else you could do with this money!
House Owners Association (HOA) Fee
HOA fees apply to the maintenance of shared properties as well as to facilities or services that are part of certain private residential communities such as condos, townhouses or residential complexes. Basically, they keep their elegant place. If you are part of such a community, don’t overlook your HOA rate. Depending on the age and size of your home and furnishings, this can add $40 to $250 to the amount you pay each month for the total cost of your home.
Get a mortgage you can afford
There are many types of mortgages and they all charge different amounts for monthly payments. But don’t make the mistake of choosing a mortgage just because you have the lowest monthly payment. If you want to create lasting prosperity, focus on the total cost. Tip: The lowest total cost mortgage is a traditional 15-year fixed-rate loan. A good indicator of whether you can afford a mortgage is when monthly payments do not exceed 25% of your monthly salary.
If you are buying a home and need help finding a large home in your price range, you should work with a real estate professional who can help you find the home of your dreams.