What is PITI?
PITI, which stands for Principal, Interest, Taxes, Insurance, are the components of the mortgage payment payable monthly:
- Principal is the loan amount money. If you borrowed $36,000 over 30 years, your monthly "Principal" payment would be $100. (36000/12 months/30 years)
- Interest is the rate on top of the principal. Since 2018, interest on qualified mortgage loans is deductible up to $750,000.
- Taxes are any taxes local, city, and state governments charge on your property. This is paid alongside monthly mortgage payments. Local property taxes are tax deductible.
- Insurance is any insurance premium required by the lender. This includes Private Mortgage Insurance (PMI) and Homeowners insurance.
Typically, PITI should not be more than 28% of a borrower's monthly gross income.