When you make your mortgage payment every month, you’re paying more than just your loan. You also have to pay your Colorado real estate taxes and your homeowner’s insurance. If you don’t pay your real estate taxes, it can lead to foreclosure. If you don’t pay your insurance, you might be in breach of your loan terms.

Most often, your lender will set up a special account, called an escrow account, from which your taxes and insurance will be paid. They’ll collect 1/12th of the expected needed amount every month, and then pay those bills for you when they come due.

Usually, this is usually the simplest way to make sure your taxes and insurance are paid. You don’t have a big tax bill once a year, and you never have to remember to make an annual or semi-annual insurance payment. The lender likes this method because they get assurances that those bills will be paid, which protects their interest in the home.

When you’re considering a mortgage payment, be sure you’re taking into account the taxes and insurance. Lenders call this a “PITI” payment – principal, interest, taxes, and insurance. To calculate the taxes and insurance:

  1. Find your home’s annual Colorado real estate tax bill
  2. Find your home’s annual homeowners insurance premium
  3. Add the two figures and divide by 12

The amount you calculate is what you should add to the principal and interest payment to get the actual monthly payment amount. Remember that taxes and insurance can vary from house to house, so two houses with the same sales price can have different monthly payments!

If you’re unsure how to estimate taxes and insurance, talk with your Colorado Springs real estate agent – or give us a call! We’d love to help you get into an awesome home with a payment you can afford.