When buying a home, it’s important to know what your monthly mortgage payment will be, but also what goes into that payment. Understanding what goes into your payment will help you better know what you can afford and what your dream home will really cost.
There are four main elements of your mortgage payment - principal, interest, taxes, and insurance (PITI). PITI is used to calculate your total mortgage payment along with the size and term of your loan.
- Principal - The amount of money borrowed to purchase a home, not including interest
- Interest – The percentage charged for the use of borrowed money.
- Taxes – Real estate taxes assessed based on the property’s value.
- Insurance – The amount you pay for property insurance and possibly private mortgage insurance depending on the loan.
Many factors will affect PITI and your monthly payment - tax rates and fixed or adjustable interest rates are one example. As a new homebuyer, understanding the facts about your mortgage payment will save you time and money.
Speak with a home loan advisor at GO Mortgage to understand the process and details to help make the best choice for you.