What's in a mortgage payment?
The full monthly mortgage payment (often called PITI) covers four things: Principal, Interest, Taxes, and Insurance. If your down payment is below 20%, lenders usually add PMI (Private Mortgage Insurance). HOA fees are paid separately but should be budgeted into the same monthly outflow.
The PITI breakdown
- Principal & Interest (P&I): Determined by the loan amount, rate, and term.
- Property Taxes: Collected monthly, paid yearly to your local government. Typically 1–2% of home value per year in the US.
- Homeowners Insurance: Required by every lender. Covers the structure and your belongings.
- PMI: Required when down payment < 20%. Usually 0.3–1.5% of the loan per year.
- HOA: If applicable, covers shared amenities and exterior maintenance.
The monthly P&I formula
M = P × [r(1+r)n] / [(1+r)n − 1]
Where P is the loan principal (home price minus down payment), r is the monthly interest rate (APR ÷ 12), and n is the total number of monthly payments (years × 12).
15-year vs 30-year: which is better?
A 15-year mortgage cuts total interest by roughly two-thirds but doubles the monthly payment. A 30-year mortgage offers flexibility — you can always pay extra toward principal. If you can comfortably afford the 15-year payment, the savings are substantial.
Frequently asked questions
What is included in a monthly mortgage payment?
Principal, Interest, Taxes, Insurance (PITI). PMI is added if your down payment is below 20%.
What is PMI?
Private Mortgage Insurance protects the lender if you default. Required below 20% down, costs 0.3–1.5% of the loan per year.
How much should I put down on a house?
20% avoids PMI and lowers your payment. Conventional loans allow as low as 3%, FHA loans as low as 3.5%.
How long should my mortgage term be?
A 30-year term has lower monthly payments but more total interest. A 15-year term cuts total interest dramatically but roughly doubles the monthly payment.