Understanding Your US Mortgage Payment (PITI)
Buying a home is one of the biggest financial decisions you'll make. A crucial part of this journey is understanding exactly what you'll be paying each month. Our Free US Mortgage Calculator helps you estimate your monthly housing cost, which includes more than just the loan repayment. We calculate your PITI, which stands for:
- Principal: The amount of your loan you repay each month.
- Interest: The charge you pay to the lender for borrowing the money.
- Taxes: The property taxes, which are typically collected by the lender and paid to your local government.
- Insurance: Your homeowner's insurance premium, also typically collected by the lender.
This all-in-one payment is what most lenders require, as it ensures that the property (their collateral) is protected by insurance and that property taxes are paid on time.
How is My Mortgage Payment Calculated?
Our calculator uses a standard formula to determine your monthly payment for principal and interest (P&I). The formula is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M = Your monthly P&I payment
- P = Your principal loan amount (Home Price minus Down Payment)
- i = Your monthly interest rate (Annual Rate divided by 12)
- n = The number of payments over the loan's lifetime (Loan Term in years multiplied by 12)
After calculating this P&I payment, we simply add the monthly costs for property taxes (Annual Tax / 12) and homeowner's insurance (Annual Insurance / 12) to give you your total estimated PITI payment.
Key Factors That Affect Your Monthly Payment
Several key inputs will significantly change your monthly payment. Understanding them is key to finding a home you can comfortably afford.
- Home Price: The single biggest factor. A more expensive home means a larger loan amount.
- Down Payment: A larger down payment reduces your loan principal (P). If you put down less than 20% in the US, your lender will also likely require you to pay Private Mortgage Insurance (PMI), which would further increase your monthly cost (Note: our simple calculator does not include PMI).
- Interest Rate: This is the cost of borrowing. A lower rate, even by a fraction of a percent, can save you thousands over the life of the loan. Your credit score is the biggest factor in determining your rate.
- Loan Term: A 30-year fixed mortgage is the most common in the US, offering lower monthly payments. A 15-year fixed mortgage will have higher payments but builds equity much faster and results in significantly less interest paid over time.
Frequently Asked Questions (FAQ)
Q: What is PITI?
A: PITI stands for Principal, Interest, Taxes, and Insurance. It represents the four main components of your total monthly mortgage payment. Lenders often bundle these four costs into a single payment held in an escrow account to ensure taxes and insurance are paid on time.
Q: Does this calculator include PMI?
A: No, this simple calculator does not include Private Mortgage Insurance (PMI). PMI is typically required by US lenders if your down payment is less than 20% of the home's purchase price. PMI can add $50 - $200+ to your monthly payment, so be sure to ask your lender for an estimate if you plan on putting down less than 20%.
Q: How can I lower my monthly mortgage payment?
A: You can lower your payment by: 1) Making a larger down payment, 2) Choosing a longer loan term (e.g., 30 years instead of 15), 3) Shopping for a lower interest rate (improving your credit score helps), or 4) Buying a less expensive home.
Disclaimer: This tool is for estimation purposes only. Your actual payment will be determined by your lender. Please consult a qualified financial advisor. You can also check our loan calculator for other payment types.