Find the monthly PITI mortgage payment of a fixed rate mortgage with this PITI Mortgage Calculator.
What is PITI?
PITI is an acronym for Principal, Interest, Taxes and Insurance.
What is a PITI Payment?
To calculate the monthly PITI payment on a mortgage, you include the principal, interest, taxes, and insurance. Use this PITI formula:
c = Monthly PITI Payment
r = Monthly Interest Rate (in Decimal Form) = (Yearly Interest Rate/100) / 12
P = Principal Amount on the Loan
N = Total # of Months for the loan ( Years on the loan x 12)
T = Yearly Property Tax Amount
i = Yearly Homeowner's Insurance Amount
Example: Monthly PITI payment for 30 year fixed-rate loan, with a principal of $250,000, a yearly interest rate of 6.5%, annual taxes of $1400, and annual insurance of $500 is :
r = (6.5 / 100) / 12 = .005416667
P = 250,000
N = (30 x 12) = 360
T = $1400
i = $500
The Monthly Payment is $1738.50
How to use the PITI Mortgage Calculator
What is the PITI Ratio?
The PITI ratio is another way of calculating the risk of the mortgage loan. A lender wants to know that a borrower seeking a mortgage has enough net monthly income to be able to pay their monthly mortgage debts. The monthly mortgage debts include the principal, interest, taxes and insurance to cover the total cost of the mortgage each month in addition to any other monthly revolving debt. Some examples could include credit card payments, car loans, or other financial debt that requires a monthly payment. Sometimes referred to as the debt ratio, the PITI ratio is a litmus test for the lender to qualify a borrower.
Is Mortgage Insurance Included in PITI?
The short answer is, yes. The mortgage insurance is included as part of the net monthly cost of a mortgage loan. Other costs can also be included in your monthly payment to the bank, but aren't apparent as part of the PITI acronym. The first that comes to mind is home owner's dues, or HOA fees that the bank can lump into your monthly payment.
PITI Cash Reserves
Another PITI aspect that helps protect the lender is cash reserves. This is a requirement that the lender puts on the borrower. They may require something like 6 month, or 12 month, cash reserves. So, after closing costs and all other purchase expenses, the borrower has to show an account, or enough liquid assets, to cover the PITI payment for that 6 month, or 12 month, requirement.
What is this Mortgage Escrow Payment?
The lender holds funds in an escrow account to pay for the taxes, insurance, or any other cost that you're having the lender take care of on behalf of your home costs. They'll make your insurance payment, or tax payment, for you out of these escrow funds. This is part of your PITI payment. Now, remember, that your taxes and insurance can change, from year-to-year. So, your PITI payment can change even if you have a fixed rate mortgage.
More Resources...PITI Payment Video
PITI Payment Tutorial
PITI Wikipedia Article