Understand PITI, PMI, and amortization. See exactly how your monthly payment is calculated and what you can do to lower it.
Last updated: April 2026 · Data: IRS, BLS, state sources
Most mortgage payments have four components, known as PITI:
If your down payment was less than 20% of the purchase price, your lender will also require PMI (Private Mortgage Insurance), adding 0.5% to 1.5% of the loan amount per year to your monthly payment.
The P&I portion of your payment uses the standard amortization formula:
M = P x [r(1+r)^n] / [(1+r)^n - 1]
Where: M = monthly payment, P = loan amount, r = monthly interest rate (annual rate / 12), n = total number of payments (years x 12).
Example: $350,000 loan at 6.5% for 30 years:
Add estimated property taxes ($300-$600/month) and homeowner's insurance ($100-$200/month) to get your full PITI payment.
In the early years of a mortgage, most of each payment goes toward interest rather than principal. This is called front-loaded amortization. As the balance decreases, more of each payment goes toward principal.
| Payment # | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $320 | $1,896 | $349,680 |
| 12 | $342 | $1,874 | $345,826 |
| 60 (year 5) | $400 | $1,816 | $323,547 |
| 180 (year 15) | $618 | $1,598 | $278,284 |
| 360 (year 30) | $2,201 | $12 | $0 |
Over 30 years, this $350,000 loan generates approximately $447,000 in total interest paid.
PMI (Private Mortgage Insurance) is required when your down payment is less than 20%. It typically costs 0.5% to 1.5% of the original loan amount per year, added to your monthly payment. On a $350,000 loan at 0.8% PMI, that is $2,800/year or $233/month.
You can request PMI cancellation when your loan-to-value ratio reaches 80% through a combination of payments and home appreciation. Under the federal Homeowners Protection Act, lenders must automatically cancel PMI when the LTV reaches 78% based on the original amortization schedule.
Calculate your monthly mortgage payment including principal, interest, property taxes, homeowner's insurance, and PMI. Covers all 50 states with local property tax data.
Open Mortgage CalculatorA full mortgage payment (PITI) includes Principal (reduces balance), Interest (cost of borrowing), Taxes (property taxes escrowed monthly), and Insurance (homeowner's insurance escrowed monthly). If your down payment was under 20%, PMI is also included.
A common rule is that housing costs (PITI) should not exceed 28% of your gross monthly income, and total debt payments should not exceed 36%. On a $6,000/month gross income, that means no more than $1,680 in PITI.
Yes, significantly. An extra $200/month toward principal on a $350,000 loan at 6.5% saves approximately $87,000 in interest and cuts about 6 years off the 30-year term.