Additional info on mortgage payment add-ons

There are many fees that can get added into a monthly mortgage payment. To mention but a few, property taxes, homeowners insurance, and mortgage insurance are often part of the monthly mortgage payment made by many people. Unfortunately, those fees do not count toward paying down the principal. They are over and above the interest and principal payment. Think of these fees like sales tax on consumer goods--you have to pay them, but they do not go toward the price of an item you purchase.

There may also be other fees (generally levied when the mortgage is taken out) that become part of the initial principal. These fees are considered part of the mortgage and not add-ons.

Every mortgage payer should know how much of their monthly payment goes toward the principal/interest and how much of the payment is fees. There are a few ways you can determine how much of your payment actually goes toward your mortgage:

Look at your mortgage paperwork. It should cover such information, although taxes and insurance may have increased since the paperwork was prepared.
Each year, you should receive a statement from your mortgage holder showing all payments and how they were credited. If you don't receive this report, complain to your mortgage holder. To determine how much of you mortgage payment are add-ons, look at the last payment on the statement and, for that payment, add the interest amount to the principal. Subtract the result from your total monthly payment. For the purposes of the mortgage calculator, the result should be close enough to obtain a meaningful result.
Ask your mortgage holder to tell you this. Since they handle your payments, they have to know.

Once you determine the total of all fees that are not directly part of servicing the debt (principal and interest), enter that amount in the "Fees Included in Monthly Payment" box of the Mortgage Calculator. If nothing is entered, the field defaults to zero.

So, why are these fees important to the Mortgage Calculators?

The Mortgage Calculators have no way of knowing what fees you are paying with your mortgage and computes your mortgage given the precise information you provide. Because these fees do not go toward the actual mortgage interest and principal, they must be subtracted from the "Total Monthly Mortgage Payment" entry to correctly compute the principal paid with each payment. If your mortgage payment includes such fees and you don't enter them in the "Fees Included in Monthly Payment" entry, the Mortgage Calculators will compute your payments incorrectly. The result will be that the computed payout will appear to be years before the acutal payout.

For computation, the Mortgage Calculators subtract the fees from your total payment. When writing results, the Mortgage Calculators add these fees back into the computed monthly payments so that the "payment" column in the reports show the total payment required to retire the mortgage.

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