A mortgage that requires payments to reduce the debt once a month.
Your monthly mortgage payment is composed of four components.
Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage.
Interest is the fee charged for borrowing money.
Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
All four of these elements are often referred to as PITI.
Your monthly mortgage payment due may be mailed to you in a book of coupons each year, or in a separate coupon every month.
Ask your lender if the automated underwriting system is used, which may reduce costs associated with your mortgage.