What's Included in a Mortgage Payment?

Your monthly mortgage payment consists of several components, commonly known as PITI: Principal, Interest, Taxes, and Insurance.

Principal & Interest (P&I)

The largest portion of your payment goes toward paying down the loan balance (principal) and the cost of borrowing (interest). Early in your loan, most of the payment goes to interest, gradually shifting toward principal over time.

Property Taxes

Property taxes are assessed by your county or municipality, typically ranging from 0.5% to 2.5% of your home's assessed value annually. Most lenders collect taxes monthly via an escrow account.

Homeowners Insurance

Required by all lenders, homeowners insurance protects your property against damage and liability. Average costs run $1,000-$2,000 per year for a typical home.

Private Mortgage Insurance (PMI)

PMI is required when your down payment is less than 20%. It typically costs 0.3%-1.5% of the loan amount annually and can be removed once you reach 20% equity.

HOA Dues

If your property is in a homeowners association, monthly HOA dues cover shared amenities and maintenance. These range from $100 to $500+ per month.