What does debt service refer to in the context of mortgage payments?

Debt service specifically refers to the total amount of money required to cover the repayment of interest and principal on a debt over a specific period, usually expressed annually or monthly. In the context of mortgage payments, this means the regular payments that a borrower makes to a lender to fulfill their obligation on the loan. These payments include both the interest portion, which is the cost of borrowing the funds, and the principal portion, which is the repayment of the original amount borrowed.

This is a critical aspect of mortgage financing because it ensures that the borrower consistently meets their financial obligations, thereby avoiding default and potential foreclosure. Understanding debt service is essential for assessing affordability and financial planning in real estate transactions. The other options pertain to different financial responsibilities associated with homeownership, such as property taxes, appraisal costs, or insurance fees, which are not included in debt service calculations.