What’s Included in a Monthly Mortgage Payment? (PITI Explained)
Understand the real cost of homeownership before you buy.
The Confusing Mortgage Statement
You’ve crunched the numbers, gotten pre-approved, and maybe even used an online mortgage calculator. But when the lender sends over your actual monthly estimate, it’s higher than you expected.
Why? Because a mortgage payment isn’t just your loan.
Most first-time homebuyers are surprised to learn that your monthly mortgage includes multiple components—not just principal and interest. To understand what you’re really committing to, you need to understand PITI.
What Is PITI?
PITI is an acronym for the four core parts of a standard mortgage payment:
P = Principal
This is the portion that pays down your loan balance each month. Early in your loan, this is a smaller portion of your payment—but it grows over time.
I = Interest
The cost of borrowing money from your lender. This is calculated based on your loan amount and interest rate, and it’s typically the biggest portion of your payment in the early years.
T = Taxes (Property Taxes)
Lenders usually collect 1/12 of your annual property tax each month and hold it in an escrow account. When taxes are due, they pay them on your behalf.
I = Insurance (Homeowners Insurance)
Most lenders require home insurance to protect the property—and they often collect your premium monthly along with your mortgage.
Optional Add-Ons That May Be Included
Depending on your situation and the property type, your monthly payment might also include:
PMI (Private Mortgage Insurance):
Required if you put down less than 20%. This protects the lender, not you.HOA Fees:
For condos or homes in managed communities. These may or may not be included in your mortgage servicer’s monthly total.Flood/Earthquake Insurance:
In certain locations, additional coverage may be required and escrowed.
Why This Matters for Buyers
Many first-time buyers budget based on principal + interest alone—but that’s just part of the equation. When you ignore the rest, you risk underestimating what you can actually afford.
Also, your pre-approval amount doesn’t reflect your comfortable monthly budget—it just shows what a lender is willing to loan you.
Buying smart means understanding the full monthly payment—before you fall in love with a home.
This blog just scratches the surface.
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