PITI Explained: Why Your Mortgage Payment Is Higher Than the Sticker Price

What PITI actually covers

PITI is the full mortgage payment most lenders use to judge affordability. It's not just the loan — it's the loan plus property taxes and homeowners insurance.

• • Principal: the amount that reduces your loan balance.
• • Interest: the cost of borrowing.
• • Taxes: local property taxes paid monthly via escrow.
• • Insurance: homeowners insurance premiums.

Principal and interest are just the baseline

Your mortgage rate and loan term set the baseline payment. But taxes and insurance can add 15% to 40% on top depending on your location and coverage.

Property taxes can swing the payment

Two identical homes can have wildly different payments if their tax rates differ. Always check the local tax rate before you fall in love with a list price.

Insurance is smaller — but not optional

Insurance is usually the smallest piece of PITI, but it still adds hundreds per month in high-risk or coastal areas. Lenders require it to protect the home.

Example: $450,000 home payment breakdown