Principle, Interest, PMI, Escrow – What’s it all About?

Principle and Interest

The first item on your house note will be the  Principle and Interest (P&I) calculation based on the original amount of your loan. Using a good Mortgage Calculator, simply plug in the current interest rate and the number of years.

The Mortgage Calculator on my website not only provides you the monthly amount of principle and interest, it will also give you a printout of the accumulated principle and interest over the term of the loan.

Most mortgages are written for 30 yrs. However, if you plug in 15 years, you can see the difference in the amount of the payment. If you feel comfortable with a little bit higher monthly payment, you will be able to pay down the principle much sooner and save a considerable amount of interest.

PMI– What’s That?

If you are financing with less than a 20% down payment, the lender will add to the loan PMIPrivate Mortgage Insurance, and it will be collected until at least 20% of the principle has been paid.

Have you heard of Fannie Mae or Freddie Mac? These are companies that back mortgages so that if a borrower defaults, the bank (your lender) will have part of their loan insured. It helps lessen the lender’s risk since they have considerably more money invested in the home than the borrower.

Anyway, point is, the lender will add PMI to your monthly payment. The rate varies, but it is a fairly nominal amount – less than half of a percent.

Insurance – Homeowners and Flood

As long as you have a mortgage, your lender has a vested interest in knowing your home is fully insured in the event of a fire, flood, or hurricane. After all, he probably has more money invested in your new home than you do. Right?

Insurance premiums are always paid in advance. So at the Act of Sale, you will pre-pay the first year of insurance premiums. (Part of your closing costs.) Then the lender will collect two-three months of premiums to set up your Escrow Account.

Thereafter, for the life of your mortgage, the lender will continue to collect escrow in order to pay your premiums each year upon renewal. And for every year of your loan, you will receive a letter from your lender detailing your escrow account and how much, if any, the monthly escrow deposit needs to be adjusted.

Property Taxes

Just as the lender collects insurance premiums on your behalf, they will also collect property taxes. Although you may receive a re-assessment letter from the Assessor’s Office over the course of your loan, you will never pay your property taxes direct. They will be paid by your lender from your escrow account. This assures the lender that the property will not go into a Sheriff’s sale for failure to pay property taxes.

How to Estimate Your Monthly House Note –

First calculate the principle and interest at today’s prevailing rate. If you are buying with less than 20% down, use an interest rate about a quarter point higher than the current rate to allow for PMI.

Then add an estimated amount for homeowners and flood insurance. Your lender can usually give you a ballpark figure. Or you can call the agent who handles your auto insurance and ask him for an estimate. Just understand that the actual premium will depend on exactly where the home is located and how much it is worth.

And of course, the last thing is property tax. In each parish, the Assessor has a website where you can check the existing taxes on a property. However, keep in mind, the current tax can change based on a new assessment, homestead exemption, and even the age of the homeowner. (The assessed value can be ‘locked in’ for senior citizens.)

For further information about buying or selling a home, drop me a note and I’ll get back in touch with you right away. . .

Sig photo2 8-18

About Joyce Albert

Why you need a Real Estate Consultant, not just another Agent… The difference between a real estate agent and a real estate consultant is the difference between someone who just wants to make a sale, and a professional who is willing to share with you their in-depth knowledge of the market in order to help you navigate one of the largest financial decisions of your lifetime. In my career as a real estate consultant, putting my clients first is the hallmark of my success. So if you are looking for a true professional to help you buy or sell a home in the Greater New Orleans Area, please contact me. I look forward to woing with you. Certified 203k Specialist I am a certified FHA-203k Specialist - a program designed to assist buyers wanting to purchase distressed properties (hurricane damaged, repos, short sales) that require repairs or major rehab. Accredidations -  Accredited Buyer Representative (ABR)  e-Certified  Short-Sale & Foreclosure Certified (SFR) Other Memberhips. . .  Louisiana Association of Realtors  New Orleans Metropolitan Assn of Realtors (NOMAR)  Gulf South Real Estate Information Network  National Assn of Realtors (NAR) of Realtors (NAR)  Real Estate Board of Accredited Buyer Consultants (REBAC)
This entry was posted in Real Estate Information and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

30 Responses to Principle, Interest, PMI, Escrow – What’s it all About?

  1. awesome weathervane says:

    Hello! This is my first comment here so I just wanted to give a quick shout out and tell you I genuinely enjoy reading through your blog posts. Can you recommend any other blogs/websites/forums that deal with the same topics? Thanks a ton!


  2. amazing weathervane says:

    Hey there! Someone in my Facebook group shared this website with us so I came to check it out. I’m definitely loving the information. I’m book-marking and will be tweeting this to my followers! Exceptional blog and terrific design and style.


  3. Barton Erixon says:

    I dugg some of you post as I thought they were invaluable very beneficial.


  4. pmi mortgage insurance says:

    Great goods from you, man. I have keep in mind your stuff prior to and you are just extremely fantastic. I really like what you have acquired right here, certainly like what you are saying and the best way through which you say it. You make it entertaining and you continue to care for to keep it smart. I cant wait to read far more from you. This is actually a wonderful web site.


  5. Irish Billingsley says:

    Many thanks for posting this. Brief enquiry, if you don’t object. Where did you grab your blog design? I will be setting up a blogging site and really like yers.


    • Joyce Albert says:

      I selected a 2-column layout and used my own picture for the header.


    • Joyce Albert says:

      I simply chose a two-colume format. Then for the header, I cropped a picture of a rural area scene here in St.Tammany. As for the topics across the header, go to ‘Appearances’ and create ‘Menus’. Then you can determine which posts belong in each menu. Good luck with your site.


  6. Wilda Peregoy says:

    I absolutely love your blog and find most of your post’s to be exactly what I’m looking for. Would you offer guest writers to write content for yourself? I wouldn’t mind writing a post or elaborating on a number of the subjects you write related to here. Again, awesome site!


  7. Lauren Tave says:

    I simply want to tell you that I am just beginner to blogging and site-building and certainly liked your blog. Most likely I’m planning to bookmark your blog post . You really come with good posts. Thank you for sharing your web site.


  8. My Homepage says:

    Sounds like some thing lots of baby boomers ought to study.


  9. Elizabet Cormack says:

    Good site, thanks.


  10. Eusebia Thomlison says:

    Great website, thanks for share this article with us


  11. Pingback: Lease to Own, Lease Purchase, Owner Finance | St Tammany Real Estate Information

  12. David Ragel says:

    I simply want to tell you that I’m newbie to blogging and honestly liked this blog. Likely I’m going to bookmark your website . You definitely have wonderful article content. Thanks a bunch for sharing with us your webpage.


  13. Anonymous says:

    U have a cool website over here. I just wanna thank you for all the interesting stuff on it. I’ll follow your website if you keep up the good work!


  14. Rosie says:

    Thanks in favor of sharing such a good thinking, post is pleasant,
    thats why i have read it fully


  15. hydrolyze says:

    This article gives clear idea in support of the new users of blogging, that really how to do blogging.


  16. hydroxatone reviews says:

    Hi there, just became alert to your blog through Google, and found that it’s really informative. I’ll appreciate if you continue this in future.
    Lots of people will be benefited from your writing.



  17. zithromax bestellen says:

    Hi there you have a great blog over here! Thanks for posting this interesting stuff for us! If you keep up the good work I’ll visit your weblog again. Thanks!


  18. 7a loan application says:

    Everything is very open with a really clear explanation of the
    issues. It was really informative. Your site is very helpful.
    Thanks for sharing!


  19. procera avh says:

    Howdy! This is kind of off topic but I need some help from an established blog.
    Is it very difficult to set up your own blog? I’m not very techincal but I can figure things out pretty fast. I’m thinking about making my
    own but I’m not sure where to start. Do you have any points or suggestions? Thanks


  20. More hints says:

    I simply want to tell you that I am just beginner to blogging and site-building and truly enjoyed your blog. Almost certainly I’m going to bookmark your blog . You absolutely have tremendous articles. Regards for revealing your web site.


  21. Anonymous says:

    I know this if off topic but I’m looking into starting my own blog and was wondering what all is required to get set up? I’m
    assuming having a blog like yours would cost a pretty penny?
    I’m not very internet savvy so I’m not 100% certain. Any recommendations or advice would be greatly appreciated. Kudos


  22. Anonymous says:

    You have a great weblog over here. I just wanna say thanks for all the interesting info on it. I’ll follow your website if you keep up the good work!


  23. credit card comparison uk says:

    Great post. I was checking constantly this blog and I’m impressed! Very helpful information specifically the last part 🙂 I care for such info a lot. I was seeking this particular information for a long time. Thank you and good luck.


  24. Pingback: Closing Costs | St Tammany Real Estate Information

  25. Anonymous says:

    Wow, this article is fastidious, my sister is
    analyzing these kinds of things, thus I am going to let know her.


  26. residences on hollywood beach says:

    Magnificent web site. Plenty of helpful info here. I’m sending it to some buddies ans additionally sharing in delicious.
    And naturally, thank you in your effort!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s