PITI in one line
A typical monthly mortgage payment has four parts — Principal, Interest, Taxes, and Insurance, abbreviated PITI. Many lenders quote only principal and interest, so the real payment that leaves your account is higher. Knowing PITI helps you budget for what you will actually pay.
Principal and interest
Principal is the part that pays down what you borrowed; interest is the cost of borrowing it. Early in the loan most of the payment is interest, and over time it shifts toward principal — this is amortisation. The principal-and-interest portion is fixed on a fixed-rate loan.
Taxes and insurance
Property tax and homeowners insurance are usually collected monthly by the lender and held in an escrow account, then paid on your behalf. They are billed annually, so the monthly figure is the yearly amount divided by twelve — and it can change year to year as tax assessments and premiums move.
PMI and HOA
If your down payment is under about 20%, lenders often add private mortgage insurance (PMI) until you build enough equity. If the property is in a managed community, monthly HOA dues are a separate cost on top of PITI. Both should be in your budget even though they are not part of the loan itself.
Estimating your payment
To estimate the full payment, take the loan amount (price minus down payment) through the amortisation formula for principal and interest, then add monthly property tax, insurance, PMI, and any HOA. A mortgage calculator does this for you — treat the result as an estimate and confirm exact figures with a lender.