What is PITI

A mortgage payment typically consists of four components – Principal payment, Interest payment, Property Tax payment, and Insurance payment. These four components of a mortgage define what is referred to as PITI (Principal, Interest, Tax, Insurance).

The calculator on this page helps you experiment with what your monthly mortgage payment will be based on: the purchase price of the home, the down payment amount, the primary loan interest rate that you qualify for and the property tax rate of your county. The chart below shows the total mortgage payment and demonstrates how much of your payment is applied to your loan, property tax, property insurance, and mortgage insurance/PMI (if applicable) payments each month. (learn more )

The principal and interest payment of your mortgage are the portions of your mortgage payment that are paid to you bank on a monthly basis to repay your loan. Property tax and insurance payments are generally paid to the county and insurance companies separately. Although property tax and insurance payments are not due on a monthly basis, some banks set up an escrow account that collects 1/12th of your annual property tax and insurance premium on a monthly basis . When an escrow account is set up, your bank pays the county tax collector and your insurance company on your behalf with the funds in this account when they become due.

When deciding to buy a home, it is important that you consider all four components of a mortgage payment, and not just your loan payment. Many first time home buyers make the mistake of simply looking at the principal and interest payments of a loan when deciding to buy a home and do not take into consideration the significant impact that property tax and insurance payments will make on their total monthly payment.

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Mortgage Calculator - Monthly mortgage payment

Home ownership is more than just PITI. Fill out the Contact form to your left to have a HUD approved housing counselor guide you through the ‘big picture’ of owning a home.

THIS SUMMARY PROVIDES ESTIMATES ONLY . Before making any home or loan purchase decision, you should obtain the advice of a professional financial advisor who is aware of your individual circumstances. Please refer to the Terms Of Use for a complete description of the proper use of this information.

Understanding Your Results

Principal and Interest are the part of your monthly mortgage payment that go directly to your bank. Principal and Interest , however, are only applicable if you need a loan to purchase your property.

Principal Payment is the portion of your monthly mortgage payment that goes towards paying down your home loan. This portion of your mortgage payment is what builds equity in your home.

Interest Payment is the portion of your monthly mortgage payment that is the fee that you pay to your bank for borrowing money. The amount of interest that you pay depends on your loan’s outstanding balance and interest rate . This portion of your mortgage payment does not build equity.

Property Tax Payment is an estimate of the amount that you pay to your county tax collector. The amount you pay for property tax depends both on your home’s purchase price and your county’s property tax rate. Although property tax payments are not due to the county on a monthly basis, some banks set up an escrow account that collects 1/12th of your annual property taxes on a monthly basis . When an escrow account is set up, your bank pays the county tax collector on your behalf with the funds in this account when they are due. If your loan does not have an escrow account, you should make it a habit to put aside 1/12th of your annual property taxes each month so that the burden will not be excessive when the payments are due to the county.

Property Insurance is an estimate of the amount you will pay for a property insurance policy for your home. Property Insurance reduces your losses in the event of fire, burglary, and many other perils and is required for you to purchase by many banks. Depending on where you purchase your home, you may have to buy supplemental insurance for earthquake, flood, or any other natural disasters that can occur in your area. Similar to Property Taxes, property insurance is generally due on an annual basis. However, 1/12th of your annual property insurance premium is accounted in your monthly PITI so that the burden will not be excessive when the payments are due to your property insurance carrier.

Mortgage Insurance (PMI) is an acronym for Private Mortgage Insurance and is required by many banks when you buy a home with less than 20% down payment. Private Mortgage Insurance is an insurance policy that your bank buys from a third party to protect itself in the case that you cannot make your monthly payment and default on your loan. Even though this insurance policy protects the bank, you as the borrower are responsible to pay the monthly premium for the policy. The premium for this insurance policy varies depending on your down payment amount. Typically, the premium for this policy decreases as your down payment approaches 20% of your home purchase price. If PMI is not shown on the chart, this means that you have a down payment of at least 20% of your home purchase price and PMI is not applicable to you.