Mortgage Payment Definition
A mortgage payment is a periodic amount paid to a mortgage holder for repayment of a mortgage loan.
A mortgage payment is usually paid monthly, the payment will be applied to the interest accrued on the mortgage balance and then to the reduction of the outstanding principal. An additional amount may be a paid as a part of the monthly payment to be used for real estate taxes.
Mortgage Payment Schedule
Depending on the lender mortgage payments can be arranged on any of the folloing schedules:
- Monthly (once per month)
- Semi-Monthly (on the 1st and 15th of each month)
- Accelerated Bi-Weekly
- Non-Accelerated Bi-Weekly (26 Payments per year)
Weekly (52 Payments per year)
Mr. McGillicuddy has a $200,000 mortgage at 5% interest and a 30 year amortization period, with a monthly payment of $1067.38. An additional $200.00 will be added to the payment pay for real estate taxes, making the total paid to the mortgage holder $1,267.38 per month.
The payment will first be applied to pay the accrued interest on the mortgage, in this example, $824.78. The remaining $242.60 will reduce the principal amount. The additional $200.00 will be placed in a tax account to pay for real estate taxes when they become due.
Typically, lenders will require the mortgage payment to be made via pre-authorized debit payments and they will request a copy of a void cheque or a pre-authorized debit permission form from your bank to facilitate this.
If your mortgage permits it, additional payments may be made to your mortgage, in addition to your scheduled monthly payment. These additional payments, referred to as “ Pre-payment Privileges”, can have a great effect upon reducing the mortgage principal amount, as well as the eventual time it will take to pay the mortgage off completely.
Want to discuss your payment frequency? Contact us anytime!
Use of a Mortgage Statement
Periodically, a mortgage borrower will receive a mortgage statement from the mortgage lender. This statement will often detail all payments made, when they were made and how they were applied to the loan. The statements usually total the amount paid to interest, the amount paid to principal, the amounts paid into the real estate tax account, as well as any default insurance premiums paid. A borrower should review their mortgage statement for errors to insure that all payments were credited properly to their account.
At First Foundation, we would be happy to discuss with you the various forms of mortgage payments that can be made, and how payments will be applied to your mortgage.
If you are interested in learning more about Mortgage Payments, please feel free to contact us today!