When making monthly mortgage payments, homeowners have the option to let the bank calculate their payment using the principal loan amount and interest on that amount or roll over any taxes and mortgage insurance fees into that payment as well. Should the buyer choose to calculate their monthly payment with just their principal and interest, the buyer is responsible for the separate, lump-sum insurance and tax payments. These payments can cost thousands and occur once or twice a year.
Banks are interested in including your insurance and tax payments in your monthly payments because failure to pay them results in a tax or insurance lien on the property.
