What is PITI and How Does it Affect a Home Loan Payment?
Your home mortgage payment can basically be lumped into four kinds of costs: • Your principal: the total amount of cash you borrow from the lender • Your interest: the amount the lender charges you to use the money to buy the house • The taxes you owe on the property • The insurance you need to protect the property against damage from hazards, floods, fires, and other potential disasters. These forecasts are sometimes referred to off-the-cuff as PITI, and the evaluation of these costs can profoundly impact your monthly payment. Obviously, the most critical component of the PITI is your principal. If you borrow $500,000 in principal, you will need to pay that money back either in small, evenly spaced increments or in bulk at various points along the term of your mortgage. If you put a lot of money down at the beginning of your mortgage to chip into the principal, you will come away with lower interest rates. If you choose an interest-only mortgage or an adjustable rate mortgage with low
