PITI: The 4 Pieces That Make Up Your Mortgage Payment

You're about to make one of the biggest financial decisions of your life — and you keep hearing this word: PITI. Your lender mentions it, the paperwork is full of it, and nobody's really stopped to explain what it actually means for your wallet.

I get it. A lot of my clients come to me knowing roughly what their mortgage payment is going to be, but they're surprised when the real number shows up. That surprise usually comes from not understanding PITI — the four components that make up your actual monthly payment.

Let me break it down the way I'd explain it to a friend at the kitchen table.

---

P — Principal: The Part That Actually Pays Off Your Home

Principal is the portion of your payment that goes directly toward reducing your loan balance. If you borrow $280,000 to buy a $300,000 home, your principal starts at $280,000 — and every month, a small slice of your payment chips away at that number.

Here's something that surprises a lot of first-time buyers: in the early years, very little of your payment goes to principal. On a $280,000 loan at 7% over 30 years, your monthly principal + interest payment is roughly $1,863. In month one, only about $230 of that goes to principal. The rest? That's the next piece.

I — Interest: What the Lender Charges You to Borrow

Interest is the cost of the loan itself — it's how lenders make money. Using that same example, in month one you'd pay roughly $1,633 in interest alone. Over time, as your balance drops, the interest portion decreases and the principal portion grows. This is called amortization, and it's why the early years of a mortgage feel like you're barely making a dent.

The interest rate on your loan is one of the biggest levers in your payment — a difference of just 0.5% on a $280,000 loan can mean $80–$100 more per month.

T — Taxes: Property Taxes Are Part of Your Payment Too

This is where a lot of people get caught off guard. Property taxes are collected by your local government and are typically rolled into your monthly mortgage payment through an escrow account. Your lender collects a portion each month and pays your tax bill on your behalf when it's due.

Property taxes vary a lot by location:

• In Texas, they average around 1.6–1.8% of the home's value annually
• In Florida, closer to 0.8–1%
• In California, typically around 1.1%

On a $300,000 home in Texas, that's roughly $4,500–$5,400 per year — or $375–$450 added to your monthly payment. That's not small. Always ask what the property taxes are before you fall in love with a house.

I — Insurance: Two Types You Need to Know About

The second "I" actually covers two different things:

• Homeowner's Insurance: Protects your home from fire, storms, theft, etc. On average, this runs $100–$200/month depending on the home and location.
• PMI (Private Mortgage Insurance): If your down payment is less than 20%, most conventional loans require PMI. On a $280,000 loan, PMI typically costs $70–$150/month. The good news — once you hit 20% equity, you can request to have it removed.

Both are typically collected through escrow alongside your taxes.

What Does PITI Look Like All Together?

Let's make it real. A $300,000 home in Florida with 5% down ($15,000):

That's the number that matters — not just the loan payment.

Ready to Know Your Real Number?

Now that you know what PITI actually means, you're already better prepared than most buyers who walk into a lender's office. Understanding these four pieces helps you budget honestly, compare homes accurately, and avoid surprises at closing.

If you want me to run a real PITI estimate for a home you're looking at — or just have questions — send me a message directly. No pressure, no sales pitch. Just a straight answer from someone who genuinely wants to help you make a smart move.