If you plan on purchasing a home, you will likely take out a home mortgage. Since your monthly mortgage payment is a combination of four charges bundled into one, it’s essential to understand each element of your overall payment and how it can fluctuate over time. Using the acronym P.I.T.I. can help you remember.

P.I.T.I is short for:senior homeonwers reviewing paperwork

  • Principal
  • Interest
  • Taxes
  • Insurance


The principal is the actual amount you borrowed from your lender. For a fixed-rate mortgage,  your mortgage payments will primarily be put toward paying interest in the first years of your loan. Over time as you pay down principal, you’ll owe less interest.


Interest is the amount charged  for borrowing funds to purchase a home. The interest you pay each month will be determined by your mortgage rates and can be either fixed or variable. It’s a percentage of the outstanding principal, which is the amount on the loan that still needs to be repaid.

As a homeowner who makes regular payments, you can claim mortgage interest on your taxes.


Your lender will calculate your estimated annual property tax based on the current tax rate. Monthly mortgage payments can change depending on your home’s assessed value and the city’s tax rate.

Since these values can change over time, it’s a good idea to watch your home’s assessed value and local tax policy. The portion of your monthly mortgage payment associated with taxes and insurance will be held in escrow until it’s due.


When you buy a home with a mortgage, you will be required to purchase a homeowner’s insurance policy. Most borrowers are supposed to carry a homeowner’s insurance policy until their home is paid off in full. You may also need private mortgage insurance depending on the size of your down payment. This factor will also be added to your mortgage payment.

Have questions about your mortgage?

Contact the experts at today!

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.