Loan Products · March 23, 2025
What Is PITI? Understanding Your Full Monthly Mortgage Payment
PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a complete mortgage payment. Here is how each piece works and what to budget.
When people talk about the mortgage payment they often mean just principal and interest. Your true monthly housing cost — PITI — includes four components.
P — Principal
The portion of your payment that reduces your loan balance. In the early years this is surprisingly small. On a $300,000 30-year loan at 7%, your first payment includes only $246 in principal. By year 25, approximately $1,400 goes toward principal and $596 toward interest.
I — Interest
The cost of borrowing money. Calculated monthly: Balance times (Annual Rate divided by 12). As your balance decreases, the interest portion of each payment decreases.
T — Taxes
Property taxes assessed by your local government, typically collected monthly through an escrow account. Tax rates vary dramatically: under 0.5% in parts of Hawaii, over 2.5% in parts of Illinois and New Jersey. On a $350,000 home in an Illinois suburb at 2%, that is $7,000/year or $583/month added to your P&I payment.
I — Insurance
Homeowners insurance required by lenders, collected monthly through escrow ($100-$200/month typical). Flood insurance adds cost in flood zones ($100-$500+/month).
PMI: The Fifth Element
When down payment is less than 20%, conventional loans add PMI ($50-$250/month). FHA substitutes MIP ($137.50/month on a $300,000 loan). These are technically not part of PITI but are practically part of your monthly housing cost.
HMS provides detailed PITI breakdowns for every loan scenario. Call 309-222-8286.