PITI is an acronym for Principal, Interest, Taxes, and Insurance. Mortgage lenders use it to describe the four main components of a mortgage payment:
Principal: This is the amount of money you borrow from a lender to purchase a property.
Interest: This is the cost of borrowing money, expressed as a percentage of the principal.
Taxes: This refers to the property taxes you must pay on your home.
Insurance: This refers to the insurance coverage you will need on your home, including homeowner's insurance and mortgage insurance (if applicable).
Together, these four components make up your total mortgage payment or PITI. They are shown in the Projected Payments section of the Loan Estimate.
How to calculate PITI?
Here's an example of how to calculate the principal, interest, taxes, and insurance (PITI) for a mortgage:
Let's say you want a mortgage for a property you'd like to purchase for $300,000. The lender approved a 30-year fixed-rate mortgage with an interest rate of 3.5% and an annual property tax rate of 1.2%. You will also be required to pay private mortgage insurance (PMI) at a rate of 0.5% of the loan amount per year.
To calculate the PITI for this mortgage, you'll need to:
1. Calculate the monthly mortgage payment using an amortizing calculator.
Loan amount: $300,000
Interest rate: 3.5%
Loan term: 30 years (360 months)
The monthly mortgage payment is $1,347.05.
2. Calculate the monthly property tax:
Property value: $300,000
Annual property tax rate: 1.2%
The annual property tax is $300,000 x 1.2% = $3,600. So, the monthly property tax is $3,600 / 12 = $300.
3. Calculate the monthly PMI:
Loan amount: $300,000
PMI rate: 0.5%
The annual PMI would be $300,000 x 0.5% = $1,500. So the monthly PMI would be $1,500 / 12 = $125.
4. Add the monthly mortgage payment, property tax, and PMI to calculate the PITI:
PITI = $1,347.05 + $300 + $125 = $1,772.05
In this example, the PITI for the mortgage would be $1,772.05 per month. It includes the mortgage principal & interest, and the property tax and PMI. Remember that this is just an example, and the PITI for your mortgage may differ based on your circumstances.
To see the actual rate and monthly payment, including all components of the PITI, check out our Mortgage Calculator. Then, feel confident in buying a home because you know what to expect.