Breakdown of Mortgage Payments (PITI)

PITI (principal, interest, taxes, and insurance) payments refer to the four components that make up a monthly mortgage payment.

1. Principal:

This is the amount of money being borrowed and is the bulk of the monthly payment. As the borrower pays off the loan, the amount of the principal payment decreases while the interest payment decreases.

2. Interest:

This is the cost of borrowing the money and is typically a percentage of the principal balance. The interest rate on the loan determines the amount of the interest payment.

3. Taxes:

This refers to the property taxes that are levied by the local government and are based on the value of the property. The property taxes are typically paid as part of the monthly mortgage payment and are held in an escrow account until they are due.

4. Insurance:

This refers to the homeowner's insurance, which covers the property in case of damage or loss. Like property taxes, the insurance premiums are typically paid as part of the monthly mortgage payment and are held in an escrow account until they are due.

In a mortgage, the PITI payment is the total of the principal, interest, taxes, and insurance payments. It is important for borrowers to budget for their PITI payments as they will be responsible for making these payments each month for the duration of the loan.