The monthly mortgage payment is, of course, the largest cost of home ownership for most people. If you buy at a time when interest rates are relatively low, you will probably opt for a fixed-rate mortgage. In that case, you can calculate at the start exactly what you'll pay each month for principal and interest for perhaps 15, 20, or 30 years. When interest rates climb, more borrowers choose adjustable-rate mortgages. If you know the lifetime cap or ceiling on your interest rate, you can calculate the worst case right at the beginning— the highest monthly charge you could ever have if interest rates shot through the roof during the term of your loan. These mortgage types are discussed in greater detail in Chapter 7. The next two items in the standard PITI payment are taxes and insurance, which can be handled in one of two ways. You may meet those bills on your own, or the lending institution will handle them for you, either by design or by request, as mentioned earlier. |
