BlogHomebuyingFinancial IQ February 11 2021

What's In Your Monthly Mortgage Payment?

We love online mortgage calculators as a first step when home shopping. You plug in the mortgage amount, the interest rate percentage, and the length of the loan. With just a few clicks you have a mortgage payment calculated! Great news. Now you're ready to figure out what you can afford and start shopping.

But hold on a moment—that amount is only part of your monthly payment. Your mortgage typically includes other additional expenses that you definitely need to account for before you set your budget. Here's how a typical monthly mortgage payment breaks down:


Very simply, the principal part of your payment is the money you borrowed and have agreed to pay back. If your mortgage is for $250,000, you will pay back that original $250,000 over the life of the loan.


When you commit to a mortgage, you lock an interest rate—this is the annual rate of interest charged by your lender in return for providing you a loan. The interest is then divided by 12, for each month, and applied to your loan for your monthly mortgage payment. So in our example of a $250,000 loan, let's say it's a 30 year fixed rate at 4% interest. Over the life of that loan, you will pay the lender back $429,624 total. So your monthly rate is calculated to help you pay off both the original amount of the loan and the interest.

But that's not all that may be included in your actual monthly payment.


Lenders will often roll your local property taxes into your monthly payment for ease. This amount varies each year based on your local tax rates and your home's assessed value. Lenders will calculate this amount and divide it by 12, and collect that money (in addition to your principal and interest) which they will place in an escrow account, which is a separate fund set up for you. Each year, both you and your lender will receive an annual notice from your county about your due taxes, and the lender will then make the payment from your escrow account on your behalf.


Some lenders require you to pay your homeowner's insurance as part of your monthly mortgage payment, particularly if you have an FHA loan or put less than a 20% down payment on your home at purchase. This protects the lender in case something happens to your home, like a fire or flood, to decrease its value before you have paid it off. Although you choose your insurance carrier, the lender will again collect the funds from you in your monthly mortgage payment, keep them in escrow, and pay your insurer for you.

Private Mortgage Insurance

If you're a first-time homeowner with a small down payment (less than 20%), you may be required to carry something called private mortgage insurance, or PMI. PMI is calculated between .5% and 1% of the cost of the mortgage and paid monthly to the lender. The good news? PMI can go away once you've paid back a certain amount of your original loan.

Want to figure out what your REAL monthly payment might be? Lennar's monthly mortgage calculator goes the extra step of helping our clients anticipate and budget for additional monthly expenses such as escrow and insurance.

Search Results for query

September 23 2021

7 Surprising Things First-Time Homebuyers Should Never Do, According to Loan Officers

Loan Officers Rachel Alcaraz and Haley Aivazian share their must-follow tips for first-time homebuyers.

Read More

September 08 2021

Expand Your Living Space with the Ultimate Patio

With some creativity, DIY spirit, and a bit of a budget, you can transform your patio into a space not only that you love, but that creates value.

Read More

September 02 2021

Mistakes Sellers Make When Showing Their Home

Here are some do's and don'ts to help show your home in the most appealing light.

Read More

August 26 2021

Organize Your Home for Back to School

With school just around the corner, now's the perfect time to whip your home into shape and get ready for smooth sailing into the school year. Here's how

Read More

August 18 2021

Home Repairs You Must Do Before You Sell

If you are getting your home ready to sell, you're better off fixing these issues now. And even if you aren't ready to sell, why not take a tour of your home with a buyer's eye, and fix those irritating repairs now so you can enjoy your home while...

Read More

August 11 2021

What is the Proposed First-Time Homebuyer Tax Credit?

Read More

August 05 2021

How to Find the Best Fixer-Upper Home

How do you know if a diamond in the rough is a good purchase? Here's how to test the waters and tell if it's okay to buy that fixer-upper home.

Read More

July 23 2021

5 Top Features Homebuyers Want in 2021

The past year of stay-at-home life has changed the way we live and think about our homes, and those changing priorities are driving the way buyers approach their options. Even in a hot market, having the following amenities can boost your buyer interest (and...

Read More

July 21 2021

Is an FHA Loan the Best Choice for You?

There's more than one path to homeownership and a variety of home loan products that can help make it happen. One of those is an FHA loan. Here's how they work, and what's new and different about them.

Read More


Mortgage Calculators

Crunch the Numbers With Our Helpful Mortgage Calculators

Payment Calculator

payment calculator


Affordability Calculator

affordability calculator


Refinance Calculator

refinance calculator


The Modern Digital Mortgage with a Personal Touch

Paperless. Effortless. Awesomeness TM

Simplify the home financing process with our Digital Mortgage. We'll be here to help navigate you through the entire process.

Get Pre-qualifiedWhat is a Digital Mortgage?