What Is PITI? The Four Parts of a Mortgage Payment

PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment. When lenders quote a monthly payment, they usually mean the full PITI amount, not just principal and interest. Understanding each part helps you budget accurately, compare loan offers, and avoid surprises after closing.

Many first-time buyers focus only on the loan itself, then feel blindsided when taxes and insurance push the monthly bill hundreds of dollars higher. Learning PITI before you shop puts you in control. Use our Mortgage Calculator to see how each piece affects your payment.

The principal is the amount you borrowed from the lender. Each month, a portion of your payment reduces this balance. Early in a 30-year loan, most of your payment goes toward interest; over time, the mix shifts and more goes toward principal. This gradual shift is called amortization.

On a $400,000 loan at 6.5% for 30 years, the first monthly payment of about $2,528 sends roughly $2,167 to interest and only $361 to principal. By year 20, the same $2,528 payment sends about $1,400 to principal. The payment stays the same, but the split changes every month.

Interest is what the lender charges for letting you use their money. It is calculated on your remaining balance, which is why it is highest at the start of the loan. Your interest rate, loan amount, and loan term together determine the total interest you will pay over the life of the loan.

Small rate differences have large consequences. On that same $400,000 30-year loan, a 6.5% rate costs about $510,000 in total interest, while a 7.5% rate costs about $607,000 — nearly $100,000 more for a single percentage point. This is why comparing rates and considering a shorter term can save so much money.

Property taxes are set by your county or municipality and vary widely — from under 0.5% of home value per year in some states to over 2% in others. Lenders typically collect one-twelfth of your annual tax bill each month and hold it in an escrow account, then pay the tax authority on your behalf when the bill comes due.

For example, a $400,000 home with a 1.1% effective tax rate owes $4,400 per year, or about $367 per month, on top of principal and interest. Because tax rates and assessments change, your escrow — and therefore your total PITI — can rise even if your loan rate is fixed.

Homeowners insurance covers damage from fire, storms, theft, and liability claims. Lenders require it because the home is their collateral. Like taxes, the premium is usually escrowed: you pay one-twelfth each month and the lender pays the insurer annually.

If your down payment is less than 20%, you will also pay PMI (private mortgage insurance), which protects the lender — not you — if you default. PMI typically costs 0.3% to 1.5% of the loan amount per year. Read our PMI guide to learn what it costs and how to remove it.

Start with principal and interest from a mortgage calculator. Then add monthly property tax (home value × local tax rate ÷ 12) and monthly insurance (annual premium ÷ 12). The sum is your estimated PITI — the number you should actually budget for.

Lenders use PITI to calculate your debt-to-income ratio. The common 28% rule says your PITI should not exceed 28% of your gross monthly income. If you earn $8,000 per month before taxes, aim to keep PITI at or below $2,240. Our affordability guide walks through the full 28/36 rule with examples.