What is PITI? Principal, interest, taxes, insurance (PITI) is the sum of a mortgage payment that includes the principal amount, loan interest, property tax, and homeowner’s property and private mortgage insurance premiums.

Here’s how it works:

Principal + interest + mortgage insurance (if applicable) + escrow (homeowners insurance and tax) = total monthly payment

If you live in a condo, co-op, or a neighborhood with a homeowners’ association, you will likely have additional fees that are usually paid separately.

Principal – The amount borrowed that must be paid back. A portion of each mortgage payment is dedicated to repayment of the principal balance.

Interest – The amount the lender charges for lending the money. This is the ongoing cost of borrowing the money. The interest rate on a mortgage has a direct impact on the size of a mortgage payment: Higher interest rates mean higher mortgage payments.

Taxes – Property taxes assessed by local government agencies. Property taxes are usually due on an annual or quarterly basis, but many mortgage lenders break the payment down monthly, collect it with your regular payment and set it aside in an escrow account.

Insurance – Depending on your loan type and down payment amount, you could pay two different types of insurance with your monthly bill: homeowners insurance and private mortgage insurance. Like property taxes, the insurance premiums may be escrowed as part of the monthly mortgage payment.