How to Read a Mortgage Payment: PITI, PMI, and What Actually Moves It

The number a lender quotes you and the number that actually leaves your bank account every month are rarely the same figure. I learned this the annoying way when I first ran the math on a house I was looking at: the “monthly payment” in the listing was principal and interest only. Add tax, insurance, and PMI, and the real number was almost $400 higher. That gap is exactly what the Mortgage Calculator is built to close.

The four (or five) pieces of your payment

Lenders shorthand this as PITI — principal, interest, taxes, insurance. Sometimes there’s a fifth piece.

Principal — the part of your payment that actually reduces what you owe.
Interest — what the lender charges you for the loan, calculated on the balance still outstanding.
Property tax — set by your county or municipality, usually billed annually but collected monthly through an escrow account.
Homeowners insurance — required by every lender, also usually escrowed and paid monthly.
PMI (private mortgage insurance) — only if your down payment is under 20%.

HOA dues aren’t technically part of PITI, but if you’re buying a condo or a house in a managed community, they’re real money leaving your account every month, so the calculator adds them into the total too.

Why 20% down is the number everyone talks about

PMI exists because a lender takes on more risk when you’re borrowing a bigger share of the home’s value. Below 20% down, that risk crosses a threshold lenders won’t absorb for free, so they charge you an insurance premium — typically 0.3% to 1.5% of the loan per year — that protects them, not you, if you stop paying.

Here’s what that means in practice: put 15% down on a $350,000 home and cross that 20% line with an extra $17,500, and you don’t just borrow $17,500 less. You erase a PMI charge that might run $100–150 a month on top of it. Run both scenarios through the calculator and the gap is usually bigger than people expect — often the equivalent of another year or two of principal reduction, just from clearing that one threshold.

PMI isn’t permanent, either. Once your loan balance drops to 80% of the home’s original value — through payments, appreciation, or both — you can request cancellation. Some loans cancel it automatically at 78%.

The line item people forget to check: property tax

Property tax varies enormously by location, and it’s the piece most first-time buyers underestimate. A $400,000 home might carry a $2,000 annual tax bill in one state and an $8,000 bill in another with a similar price tag. That’s a $500/month swing hiding in a single field.

If you only have a tax rate (say, 1.2%) rather than a dollar figure, multiply it by the home price before entering it — the calculator wants the annual total, not the percentage.

What actually moves the payment the most

Run a few scenarios and the ranking is fairly consistent:

Interest rate. A 1-point difference on a 30-year loan changes the principal-and-interest payment by roughly 10%. On a $400,000 loan, that’s often $200+ a month.
Loan term. Going from 30 years to 15 cuts total interest dramatically but roughly doubles the monthly principal-and-interest payment — only workable if your budget has real room.
Down payment size, especially around the 20% line, for the PMI reason above.
Property tax and insurance, which vary by location more than most buyers expect and don’t show up in the sticker-price comparison between homes.

A worked example

Say you’re looking at a $350,000 home with $70,000 down (20%, so no PMI), a 30-year loan at 6.5%, $3,600 a year in property tax, and $1,400 a year in insurance.

Loan amount: $280,000
Principal & interest: roughly $1,769/month
Property tax: $300/month
Insurance: $117/month
Total: around $2,186/month

Drop the down payment to 10% ($35,000) on the same home, and you’re financing $315,000 instead — the principal-and-interest payment climbs to about $1,991/month, and a 0.5% PMI rate adds roughly $131/month on top. The 10-point drop in down payment costs you more than $350 extra every month, not just the roughly $221 difference in principal and interest.

Plug in your own numbers on the Mortgage Calculator and see the full monthly payment, not just the headline principal-and-interest figure lenders like to lead with.