How is your mortgage payment calculated, and what exactly are you paying for each month?
If you’re buying a home in Austin, Texas, this is one of the first questions you’ll likely ask—and with good reason. Understanding what’s included in your monthly mortgage payment helps you budget smarter, avoid surprises, and make confident decisions.
At Holley Homes Realty, we believe informed buyers are empowered buyers. That’s why we’re breaking down each part of your payment so you know exactly where your money is going.
The 5 Core Components of a Mortgage Payment
Most mortgage payments are made up of five parts:
Let’s dive into each one.
The principal is the amount you borrowed to buy your home. If you purchased a home in Austin, Texas, for $400,000 and put 5% down, your loan amount would be $380,000. A portion of each monthly payment goes toward reducing this balance.
This is the cost of borrowing money, expressed as an annual interest rate. For example, if your interest rate is 6.5%, that’s the amount your lender charges you each year on the remaining principal balance.
Pro Tip from Brandon Holley, Austin, Texas real estate agent: Ask your lender for a loan estimate and an amortization schedule. It shows how much of your payment goes to interest vs. principal over time. Any extra payment you make goes straight to the principal, which helps you pay off your loan earlier and reduce the total interest paid.
In Austin and surrounding Central Texas counties like Travis and Hays, property taxes are a big part of your mortgage payment. These taxes fund local schools, public safety, and infrastructure.
Expect to pay 2.0% to 3.2% of your home’s assessed value annually, depending on your location.
Many lenders collect your taxes monthly and hold them in an escrow account, paying them on your behalf twice a year.
This policy protects your home from damage (fire, storm, theft, etc.). It’s required by lenders and is typically included in your monthly mortgage payment via escrow.
Average cost in Austin, Texas: $100–$200/month, depending on size, materials, location, and coverage level.
If you put down less than 20%, you’ll likely pay Private Mortgage Insurance (PMI). This protects the lender, not you, in case you default.
Many buyers don’t realize that taxes and insurance are escrowed into their mortgage. That means your lender collects those payments monthly and pays them when due.
You don’t write separate checks for property taxes or homeowners' insurance unless you’re putting down more than 20% and request to waive escrow (not always allowed).
This helps you avoid surprises, but it also means your mortgage payment can go up if your taxes or insurance premiums rise.
Great question! Even if your interest rate is fixed, your total monthly payment can still increase if your property taxes or insurance costs go up.
This happens frequently in Travis County and parts of Williamson and Hays as property values continue to rise. At Holley Homes Realty, we help clients plan for these changes with proactive budgeting tools and yearly reviews.
If you're buying in a neighborhood with a Homeowners Association (HOA)– especially in master-planned communities and new construction neighborhoods around Austin – you may also owe monthly or annual HOA fees.
These are not always included in your mortgage escrow and are typically billed separately.
Ask Brandon Holley, Austin Realtor, about which HOAs in your area include front yard maintenance, internet, or amenity access—some do!
Here’s a rough example of what a $400,000 purchase in Austin, TX, might look like with 5% down:
Your numbers will vary based on your credit score, lender, loan type, down payment, and property location.
Understanding what’s included in your mortgage payment allows you to:
At Holley Homes Realty, we don’t just show you homes. We walk you through the numbers so you feel confident every step of the way.
If you’re thinking about buying a home in Austin, Texas, let’s chat about what your monthly costs might look like before you fall in love with a property. We can run the numbers together and even connect you with trusted local lenders.
Reach out to Brandon Holley, licensed Realtor and owner of Holley Homes Realty, for a personalized mortgage estimate based on your goals, neighborhood preferences, and budget.
Let’s make sure your dream home fits your lifestyle and your finances.
Contact Holley Homes Realty today to schedule your free homebuying consultation in Austin, Texas:
Call/Text me at 512.487.9242
Email me at brandon@holleyhomesrealty.com
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