Mortgage Payment With Taxes and Insurance (PITI), Explained
Every mortgage advertisement quotes the smallest honest number it can: principal and interest. The payment that actually leaves your bank account each month is a different, larger figure — and it has a name. PITI. Here is what it stands for, what each part costs on a real house, and how to estimate yours before a lender does it for you.
Key takeaways
- PITI = principal, interest, property taxes, insurance — the whole monthly payment, escrow included.
- On a $400,000 home at today’s 7.28% average rate, principal and interest is $2,189; the true PITI is about $2,729.
- Taxes and insurance typically add 25% on top of principal and interest — 33% or more in high-tax states like New Jersey.
- Estimate yours in seconds: take principal and interest and add 1.5% of the home’s price per year, divided by 12, for taxes and insurance combined.
The four letters, one by one
P is for principal — the slice that repays what you borrowed. Early in a 30-year loan it is painfully small: on our worked example below, only about $250 of the first payment reduces the balance. I is for interest — the lender’s charge for the money, and the dominant slice for the first decade or so. T is for taxes — your property tax, divided by twelve. I is for insurance — homeowner’s insurance, also divided by twelve. The first two go to the lender; the last two usually go into an escrow account, where your servicer holds them until the bills fall due. That is the whole trick of PITI: it is not four payments, it is one payment with four destinations.
A worked example on a $400,000 home
Put 20% down on a $400,000 home and you borrow $320,000. At 7.28% — the average 30-year fixed rate in Freddie Mac’s survey of 1 October 2026 — principal and interest comes to $2,189 a month. That is the number every calculator leads with, and it is where most buyers stop. Now the rest. Property tax at a middle-of-the-road 1.0% of value costs $4,000 a year, or $333 a month. Homeowner’s insurance at the national average premium Bankrate found in its 2025 True Cost of Home Insurance report — $2,470 a year — is another $206 a month. Add them up: $2,729 a month, every month, for thirty years. The headline figure understated your payment by $540 — nearly 25%. On a tight budget, that gap is the difference between comfortable and house-poor.
Why the tax slice swings so wildly
Property tax is the most local number in American personal finance. ATTOM’s analysis of 2025 tax bills put the national effective rate at 0.9% of a single-family home’s value — but New Jersey, the highest-tax state in that analysis, averaged 1.58%, while Texas came in around 1.25% in a separate Census-based study. Run our same $400,000 home through New Jersey’s rate and the tax slice alone becomes $527 a month, pushing PITI to about $2,922. Same house, same loan, $193 more a month than the 1.0% version — roughly $70,000 of extra cost over the loan’s life if rates stay put. This is why two identical houses across a state line can have genuinely different monthly costs, and why any affordability estimate that ignores your county’s rate is fiction.
Escrow: where the T and I actually sit
Most buyers never write a cheque to the county tax office. Instead, the servicer collects one-twelfth of your estimated annual tax and insurance with every mortgage payment, holds it in escrow, and pays both bills when they arrive. At closing you will pre-fund that account with several months of cushion — part of why closing costs surprise people — and once a year the servicer runs an escrow analysis: if taxes or premiums rose, your monthly PITI rises with them, and any shortfall is spread over the next twelve months. That is the usual culprit when a “fixed” mortgage payment goes up in year two. The loan didn’t change. The bills did.
The 20-second estimate
You do not need a spreadsheet to sanity-check a listing. Take the principal-and-interest figure any mortgage calculator gives you, then add 1.5% of the home’s price per year for taxes and insurance combined — on a $400,000 home, $6,000 a year, or $500 a month. At national-average tax and insurance costs that lands within about $40 of the worked example above. Live somewhere with property tax above 1.3% — much of the Northeast, Illinois, Texas — use 1.9% instead. It is a blunt instrument, deliberately: its job is to stop you falling for a home whose real payment you have never seen. For the exact version, run your own price, rate and state through our mortgage calculator, which itemises all four slices.
What PITI leaves out
Two regular costs sit outside the acronym. Private mortgage insurance applies when you put less than 20% down on a conventional loan — on a $320,000 loan it typically runs $100–$200 a month until you reach 20% equity and can cancel it. HOA dues, where they exist, are entirely separate and can rival the tax slice in condo communities. Neither is optional, and lenders count both when they test your budget against the 28/36 rule — so should you. Our guide to what an $80k salary really buys shows how these add-ons shrink an affordable price in practice.
See your own PITI
Enter a home price, down payment and rate, and the calculator splits your payment into principal, interest, taxes and insurance — no teaser figures.
Open the mortgage calculatorSources & further reading
Every external figure in this guide comes from one of these. The worked examples are our own arithmetic, shown in full above.
- Freddie Mac — Primary Mortgage Market SurveyThe weekly US rate survey behind the 7.28% figure (1 October 2026).
- ATTOM property tax analysis, reported by Fox BusinessThe 0.9% national effective rate and New Jersey’s 1.58% for 2025.
- Bankrate — True Cost of Home Insurance reportThe $2,470 average annual homeowner’s premium used for the insurance slice.
- Consumer Financial Protection Bureau — closing costs and escrow prepaidsWhat you pre-fund at closing, including escrow cushion, in plain English.
Frequently asked questions
What is PITI in a mortgage payment?
PITI stands for principal, interest, taxes and insurance — the four parts of a full monthly mortgage payment. Principal repays the loan, interest is the lender’s charge, and the taxes and insurance portions are collected monthly into an escrow account that pays your property tax and homeowner’s insurance bills when they fall due.
Why is my actual mortgage payment higher than the calculator estimate?
Most online estimates show principal and interest only. Add property tax (around 0.9% of the home’s value a year nationally, but 1.5% or more in high-tax states) and homeowner’s insurance (about $206 a month at the national average premium) and the real payment is typically 20–35% higher. Escrow shortages after a tax or insurance rise can push it higher still.
Does PITI include PMI and HOA fees?
No. Strictly, PITI is only the four named parts. Private mortgage insurance (required with less than 20% down on a conventional loan) and HOA dues are extra lines on top — together they can add $150–$400 a month, so budget for them separately. Lenders still count them when they assess what you can afford.
Can I pay my own property taxes and insurance instead of using escrow?
Sometimes. Many lenders allow an escrow waiver once you have at least 20% equity, sometimes for a small fee, though FHA and VA loans usually require escrow for the life of the loan. The trade-off is discipline: you must save roughly a twelfth of both bills every month yourself, because a missed tax payment can put a lien on your home.
Why did my mortgage payment go up after the first year?
Almost certainly the escrow side, not the loan. Your principal and interest stay fixed on a fixed-rate mortgage, but property taxes and insurance premiums rise. At the annual escrow analysis your servicer recalculates the monthly tax-and-insurance portion and spreads any shortage over the next 12 months, so the total payment steps up even though the mortgage itself never changed.