Which components are included in a monthly mortgage payment on impounded loans?

The correct choice identifies the components that make up a monthly mortgage payment in the context of impounded loans, also known as escrow loans. In these loans, the borrower's monthly payment often includes four key elements: principal, interest, taxes, and insurance.

• Principal is the portion of the payment that reduces the loan balance.

• Interest is the cost of borrowing funds, typically calculated as a percentage of the outstanding balance.

• Taxes refer to property taxes that are often collected on an annual basis but are divided into monthly payments and included in the mortgage payment. When taxes are impounded, the lender collects these monthly amounts and holds them in an escrow account until the tax payments are due.

• Insurance refers to homeowners insurance, which protects the property against various damages. Like property taxes, insurance payments can also be impounded, allowing the lender to pay the insurer on behalf of the borrower when premiums are due.

This methodology provides a structured way to ensure that necessary payments are made on time, reducing the risk of tax liens and lapsed insurance coverage which could potentially jeopardize the lender's collateral.

The other options do not accurately capture the standard components of a monthly mortgage payment for impounded loans. They either include elements that are not part of the