What is PITI: The Standard for US Mortgages
Your monthly mortgage payment is more than just paying back the money you borrowed. It typically includes four main components, often referred to as PITI: Principal, Interest, Taxes, and Insurance.
Principal
The portion of your payment that goes toward paying down the original loan amount.
Interest
The cost of borrowing the money, calculated based on your current interest rate.
Taxes
Property taxes assessed by your local government. We estimate this at a national average of 1.2% annually.
Insurance
Homeowners insurance to protect your property, estimated at $1,500 annually.
The Power of Accelerated Payments
By making an “Extra Monthly Payment”, you are directly reducing the Principal balance of your loan. This creates a compounding effect: a lower balance means less interest is calculated each month, allowing you to save thousands of dollars and become debt-free years earlier.
Understanding PMI (Private Mortgage Insurance)
In the US market, if your down payment is less than 20%of the home's purchase price, lenders typically require PMI. This protects the lender in case of default. LuxeMortgage automatically applies an estimated 0.5% annual PMI fee if your down payment is under the 20% threshold.