When you see a "monthly payment" advertised on a real estate listing, it's often misleading. It usually only includes the mortgage principal and interest, missing nearly 30% of your actual bill. To know what you will really pay, you need to calculate PITI.
What Does PITI Stand For?
PITI is the industry acronym for the four distinct charges that make up a standard monthly mortgage bill:
- P - Principal: The portion of your payment that pays down the loan balance.
- I - Interest: The fee the lender charges you for borrowing the money.
- T - Taxes: Property taxes collected by your local government (city/county) to fund schools and infrastructure.
- I - Insurance: Homeowners insurance to protect the property against fire, theft, and disasters.
How to Calculate PITI Manually
While the math can be complex, breaking it down helps you understand where your money goes.
1. Calculate Principal & Interest (PI)
This requires a complex amortization formula.
Formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Example:
On a $350,000 loan at 6.5% for 30 years, this is roughly $2,212/month.
2. Estimate Taxes (T)
Take the home's annual property tax rate (e.g., 1.2%) and divide by 12.
Math:
($350,000 × 0.012) ÷ 12 = $350/month
3. Estimate Insurance (I)
Take the annual premium (e.g., $1,200) and divide by 12.
Math:
$1,200 ÷ 12 = $100/month
4. Total PITI
$2,212 + $350 + $100 = $2,662/month
The "Hidden" Costs: PMI and HOA
If you put down less than 20%, your PITI becomes PITI + PMI (Private Mortgage Insurance). Additionally, if you live in a community with a Homeowners Association, you must add HOA dues.
Skip the Math
You don't need a spreadsheet to figure this out. You can use our free tool to automatically calculate your PITI payment instantly using today's interest rates and local tax estimates.
Use Mortgage Calculator →