Most commonly, your monthly payment has four main components:
- Principal: The portion of your payment that goes toward repayment of the outstanding loan balance.
- Interest: The interest charge on the outstanding balance.
- Taxes: One-twelfth of your expected annual property taxes which is deposited into your escrow account.
- Insurance: This includes any hazard insurances you’re required to maintain, such as homeowner’s and flood insurance. Depending on your situation, this can also include mortgage insurance or other guarantee fees.
Frequently you’ll hear people refer to the first initial of the items above when describing a mortgage payment. For example, “P&I” refers to just the principal and interest portion of your payment. “PITI” refers to all 4 components together. Our payment calculator can help you get an idea of what your payment might look like.