You will need to have a few things to get started before you can use the PITI calculator. Make sure you know your annual tax amount, insurance cost, interest rate, and principal loan amount.
There is a common formula for calculating PITI that the calculator will use for you:
PITI= monthly tax + monthly insurance + monthly mortgage payment
The monthly tax will be your annual tax amount and then you divide it by 12. Monthly insurance is your annual insurance cost also divided by 12. You should know your monthly mortgage payment and the principal loan amount based on the loan documents you received. If you aren’t sure what they are, you can always ask your loan service provider or use a mortgage payment calculator.
If you don’t already have a loan, you can enter in the numbers you think you can afford or the numbers you are trying to get when you go loan shopping. This will give you a quick idea of how much you can afford and if the numbers you have in your head are correct or not.
Here is a quick example of the calculator and some numbers:
Let’s say you need $4,800 a year to cover the property tax and your insurance costs you $1200 a year. Your expected monthly tax will be $4,800/12 which gives you $400. You will also divide $1200 by 12 and get $100.
Your mortgage might be $200,000 for 30 years with a 7% interest rate. This will give you a monthly payment of $1,330.60. You will then need to add all these together to get the final cost of the PITI.
$400+ $100 + $1,330.60 gives you a total of $1,730.60. These are just basic figures and your final amount might be more or less depending on your insurance costs and how much of a loan you take out as some houses will always need bigger mortgages than others.
We mentioned above also being able to use a mortgage calculator in case you aren’t sure what your monthly payment is. Here is some more information on that and what to do when trying to figure out your monthly payment.
The mortgage calculator will do all the hard work for you by using a formula to create your mortgage payment. You will need to know your mortgage payment before being able to use the PITI. So, before using the PITI, make sure you can create your mortgage payment with the calculator or you can use the formula on your own.
The mortgage payment calculator looks like this:
M= P [i(1+i^n]/[(1=i)^n-1]
To use the formula, make sure you know what the variables mean:
● M= monthly mortgage payment
● P= principal amount of the loan
● i= the monthly interest rate
● n= the number of payments over the life of the loan
If you need help calculating the interest, you will need to divide your rate by 12. Make sure to convert the percentage, so if your rate is 6%, you will do 0.06/12.
The number of payments over the life of the loan can also be tricky if you’ve never done it before. If your loan is 30 years, you can to 30 multiplied 12 to give you 360 payments over the lifetime of the loan.
It’s always important to know your financial situation and how much you can afford to pay or not pay before taking out a mortgage. Just because a lender approves you for an offer doesn’t always mean you should take it. You will need to make sure you know exactly what your monthly payment is so you know if you can afford it or not.
Keep in mind your housing is often your biggest cost of living, so you need to make sure you can afford it without it being a huge burden every month. Some people make the mistake of taking out a mortgage that is too big and they find themselves overwhelmed every month when the bills come in.
Using the PITI calculator and the mortgage calculator can help you estimate your mortgage payment when you buy a home or when you are refinancing the home you already live in.