Back to School! Time to Relearn the ABCs of Your Mortgage

August signals “back to school” for most, so it’s the perfect time to sharpen your skills. Whether you are paying off your loan this year or just bought your first home, understanding the ABCs of your fixed-rate mortgage can help you stay knowledgeable and confident about your financial situation.

A is for ANALYSIS

There are four elements that make up your mortgage payment. The first two listed below always stay the same when you have a fixed-rate mortgage. The last two are analyzed and estimated every year and are subject to change.

1. Principal: The amount you borrowed to purchase your home

2. Interest: The amount you pay to borrow that money

3. Taxes: The amount owed for property taxes (recalculated at the end of the year)

4. Insurance: The amount owed for homeowners’ insurance (recalculated at the end of the year)

Understanding PITI can help you spot changes that may be made to your mortgage payment over time.

B is for BALANCE

Escrow is essentially a built-in savings account for the parts of your PITI that are analyzed at the end of the year: taxes and insurance. ServiSolutions collects an estimated amount for these costs each month as part of your regular payment, and then pays them for you when they are due. Keep an eye on these so you can understand how they fluctuate at the end of the year.

C is for CREDIT

Staying on top of your payments is one of the simplest and most powerful ways to protect your credit score. Payment history accounts for a significant portion of your score. Set reminders or enable autopay for your bills, especially for your mortgage payment. Think of each on-time payment as a small deposit into securing your financial future.

More resources:

Escrow Statements Explained | ServiSolutions

The Importance of Timely Payments: How Late Payments Can Impact Your Credit Score