When you look at a mortgage payment, you're actually seeing four different components working together. Understanding these elements is crucial for budgeting and making informed home-buying decisions.
Use our free mortgage calculator to estimate your complete monthly payment
Calculate Mortgage →Most mortgage payments consist of four parts, commonly referred to as PITI:
The amount going toward paying down your actual loan balance
The cost of borrowing money from the lender
Property taxes collected by your lender for local government
Homeowners insurance and possibly PMI (Private Mortgage Insurance)
Mortgage interest is typically compounded monthly, which means you pay interest on both your principal balance and any accumulated interest.
In the early years of your mortgage, most of your payment goes toward interest. As time passes, more goes toward principal. This process is called amortization.
Example: On a 30-year $300,000 mortgage at 4%:
Our mortgage calculator shows exactly how each payment is split over time
View Payment Schedule →If your down payment is less than 20%, lenders typically require PMI. This protects the lender if you default on the loan and usually costs 0.5% to 1% of the loan amount annually.
Most lenders require insurance to protect their investment. Costs vary by location, home value, and coverage level.
Lenders often collect 1/12 of your annual property tax bill each month, holding it in an escrow account.
Your interest rate and payment remain the same for the entire loan term. Perfect for stability and long-term planning.
Start with a lower rate that adjusts periodically. Better for short-term ownership but carries uncertainty.
Your down payment significantly impacts your monthly payment and total loan cost:
Our free mortgage calculator helps you understand the full picture of homeownership costs:
Let's calculate payments for a $350,000 home with 10% down:
Understanding mortgage payments empowers you to make smarter home-buying decisions. By knowing how PITI works and using tools like our mortgage calculator, you can accurately budget for homeownership and choose the right mortgage for your financial situation.
Ready to calculate your specific mortgage scenario? Use our free tool below:
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