REAL ESTATE BASICS
Understanding the Numbers
Separate purchase costs, borrowing costs, and ownership expenses with clearly labeled examples.
Last reviewed:01
Price, down payment, and principal
Hypothetical example: a $500,000 purchase price with a $50,000 down payment leaves a $450,000 loan, before other financing adjustments. The loan principal is the borrowed balance. These are invented numbers to show the relationship—not an affordability target or loan recommendation.
02
Interest and the monthly payment
Interest is a borrowing charge. Principal repayment and interest are distinct components. Taxes, homeowners insurance, mortgage insurance, and association dues may add to housing expenses and may not all be paid to the same recipient. Read the whole payment breakdown.
03
Closing costs and upfront cash
Down payment is not the entire amount needed. Closing expenses, deposits already paid, prepaids, and credits affect cash to close. See the closing-cost guide for a labeled arithmetic illustration and questions to ask about individual charges.
04
Equity is not spendable cash
Hypothetical $500,000 property value minus $400,000 secured debt equals $100,000 equity before selling expenses or other adjustments. The value is uncertain until established for a particular purpose. Borrowing against equity adds debt, and selling involves costs; neither converts the entire number directly to cash.
05
Taxes, insurance, and association costs
Verify current and prospective costs with the appropriate assessor, insurer, lender, or association. A prior owner’s tax or insurance bill may not predict yours. HOA dues may not cover all maintenance and can coexist with assessments. Make a list of ongoing items separate from one-time transaction costs.
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