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Understanding Your Mortgage Payment Breakdown

Your total monthly mortgage payment is often referred to as PITI, which stands for Principal, Interest, Taxes, and Insurance. Here's a look at each component:

  • Principal: This is the amount of money you borrowed from the lender. Each mortgage payment includes a portion that goes toward paying down your loan balance.
  • Interest: This is the cost of borrowing the money, expressed as a percentage rate. In the early years of your loan, a larger portion of your payment goes toward interest.
  • Taxes: Property taxes are collected by local governments to fund public services like schools and roads. Your lender typically collects these from you monthly and holds them in an escrow account, paying the tax bills on your behalf.
  • Insurance: Homeowner's insurance protects your home against damage. Like taxes, these premiums are usually collected monthly into an escrow account. If your down payment is less than 20%, you may also be required to pay Private Mortgage Insurance (PMI).

What is PITI?

PITI is the acronym for the four components of a mortgage payment: Principal, Interest, Taxes, and Insurance. Lenders use PITI to determine your ability to afford a mortgage. Our calculator includes these elements to give you a more accurate estimate of your total monthly housing cost, optionally including HOA fees and PMI as well.

How to Use Our Mortgage Calculator

To get the most accurate estimate, follow these steps:

  1. Enter the Home Price: The full purchase price of the home.
  2. Provide Your Down Payment: The amount of money you're paying upfront. This is often a percentage of the home price (e.g., 20%).
  3. Set the Loan Term: The length of your mortgage, typically 15 or 30 years.
  4. Input the Interest Rate: The annual interest rate you expect to get from a lender.
  5. Add Estimated Annual Costs: Include your property taxes and homeowner's insurance. You can often find estimates for these on real estate listings or county websites.
  6. Include Optional Fees: Add any monthly Homeowner's Association (HOA) dues or Private Mortgage Insurance (PMI) if applicable.
  7. Calculate: See your estimated monthly payment and a detailed amortization schedule showing your loan balance over time.