Understanding Your Mortgage Payment (PITI)

When lenders and calculators talk about a “monthly mortgage payment,” they usually mean more than just paying back the loan. The industry shorthand is PITI: Principal, Interest, Taxes, and Insurance. Understanding each piece is the difference between a budget that works and a nasty surprise at closing.

The four parts of PITI

• Principal — the portion of each payment that actually reduces what you owe.
• Interest — the lender's charge for the loan, highest at the start and shrinking as the balance falls.
• Taxes — property taxes, usually collected monthly into an escrow account and paid on your behalf.
• Insurance — homeowners insurance, plus PMI (private mortgage insurance) if your down payment is under 20%.

Why principal and interest shift over time

A fixed-rate mortgage keeps the principal-and-interest payment constant, but the split between the two changes every month. Early on, most of your payment is interest because the balance is large. As the balance shrinks, more of each payment goes to principal. This is called amortization, and it's why paying a little extra early saves so much interest.

The parts people forget

Property taxes and insurance can add hundreds of dollars a month on top of principal and interest, and they rise over time even on a fixed-rate loan. PMI is often required until you reach 20% equity, then it can be removed. HOA dues, where they apply, are separate again. A realistic affordability estimate has to include all of these — not just the loan payment.

Use the calculators below to see your full PITI payment, how much house you can afford once taxes and insurance are included, and when PMI applies.