What Does a Mortgage Cover?

Are you thinking of moving from renting to owning?  You probably have a lot of questions.  One of them being, what is a Mortgage?  What does it cover and how is it different than rent?

Most mortgages have four parts.  

Principal
The first part of the mortgage is the principal.  This is what is one of the main positive differences between a mortgage and rent.  When you pay the principal, you are paying down what you owe on the house.  When you have no more principal, you have a fully paid for house!

Interest
Interest is what you are paying the bank to lend you the money to buy your house.  You will want to talk to a mortgage adviser to see what the current rates are and what the amortization schedule will look like.  In a nut shell, when you have a high amount of principal, the amount of interest you pay on that principal is higher. As you pay down the principal the amount of interest you pay becomes less.   You will have consistent payments, only the bulk of the payment will shift from interest to principal the longer you pay on your house. 

Homeowner's Insurance
You will be required to obtain homeowner's insurance when obtaining a loan.  This will help protect you from loss as a result of fire, smoke, theft, etc...  Often, you can find good deals bundled up with your car insurance.  The monthly fee will often be encompassed in your mortgage payment. 

Property Tax
Finally, your mortgage will cover property tax.  Each house has a tax assessed value.  The owner will be responsible for paying the property tax.  Harrisonburg's tax is $0.69 per $100 (See below for Broadway and Timberville).  So, if you own a $100,000 property, your yearly tax would be $690.  Conveniently, you will pay a chunk of the tax per month as a part of your mortgage payment.  

Broadway's tax rate is $0.71 per $100.
Timberville's tax rate is $0.755 per $100.