Understanding Your Mortgage Payment (PITI)

Your total monthly mortgage payment often consists of four parts, commonly abbreviated as PITI:

• Principal (P): The portion of your payment that goes towards paying down the original loan amount.
• Interest (I): The cost of borrowing the money, paid to the lender. In early years, interest makes up a larger portion of your payment.
• Taxes (T): Property taxes assessed by local government authorities. Lenders often collect 1/12th of the estimated annual property tax bill each month and hold it in an escrow account to pay the bill when it's due.
• Insurance (I): Homeowner's insurance premium. Like taxes, lenders often collect 1/12th of the annual premium monthly via escrow to ensure the property remains insured.

This calculator estimates the PITI based on your inputs. Note that it doesn't include potential Private Mortgage Insurance (PMI) - typically required if your down payment is less than 20% - or Homeowners Association (HOA) fees, which could further increase your total monthly housing cost.

Amortization Schedule

The amortization schedule shows exactly how each monthly Principal & Interest (P&I) payment is divided over the entire loan term. You'll notice:

• In the beginning, a larger portion of your P&I payment goes towards **interest**.
• Over time, as the loan balance decreases, more of your payment goes towards **principal**.
• The final payment may be slightly different to ensure the loan balance reaches exactly zero.

Key Factors:

• Interest Rate: Even small changes significantly impact total interest paid.
• Loan Term: Shorter terms (e.g., 15 years) mean higher monthly P&I payments but much less total interest paid compared to longer terms (e.g., 30 years).
• Down Payment: A larger down payment reduces the loan amount, lowering monthly P&I and potentially avoiding PMI.