What goes into a mortgage payment
Lenders often describe the monthly payment as PITI: principal, interest, taxes and insurance. Principal and interest are fixed for the life of a fixed-rate loan. Property tax and homeowners insurance are usually collected monthly into an escrow account and can change each year. If you put down less than 20%, you'll also pay PMI, and in many neighborhoods there are HOA dues on top.
Worked example
A $400,000 home with $80,000 (20%) down leaves a $320,000 loan. At 6.5% for 30 years, principal and interest come to $2,023 a month. Add 1.1% property tax ($367 a month) and $1,800 a year of insurance ($150 a month) and the full payment is about $2,539. Over 30 years you'd pay roughly $408,000 in interest — more than the loan itself.
Put down only 10% ($40,000) instead and the loan grows to $360,000: principal and interest rise to $2,275, and PMI at 0.5% adds $150 a month until you reach 20% equity — around year 8 on the normal schedule. The total payment becomes about $2,942.
Ways to lower your payment
- Put down 20% or more to avoid PMI entirely.
- Shop at least three lenders — small rate differences add up to tens of thousands over 30 years.
- Improve your credit score before applying; it directly affects your rate.
- Compare homeowners insurance quotes and check whether you qualify for property tax exemptions (such as a homestead exemption).
What this includes & its limits
- Fixed-rate loans with level monthly payments; taxes, insurance, PMI and HOA as you enter them.
- Does not model adjustable-rate (ARM) loans, FHA mortgage insurance, closing costs, points or extra payments.
- PMI is assumed to stop when the scheduled balance reaches 80% of the purchase price.
Frequently asked questions
For estimates only — not a loan offer or financial advice. Your lender's Loan Estimate shows your actual terms.