A PITI calculator will reveal an estimate of what your total monthly mortgage payment will be when you take all four major factors into consideration: Principal, Interest, Taxes and Insurance.
Your Monthly Mortgage Payment
There is much more to a monthly mortgage payment than paying down the money you owe to your mortgage lender, especially if your monthly mortgage payment includes an escrow account. Unless an online mortgage calculator includes all four facets of PITI, you may not get a very accurate estimate.
The principal payment refers to the actual balance that you owe for the home loan. This is the portion of the monthly payment that actually reduces the debt balance. A very small portion of your monthly payment goes to principal in the beginning because a bigger portion of the funds goes to interest, but this changes as the loan matures.
The interest you pay for your home loan is a portion of your monthly payment. The good news is that this interest is often tax deductible if you qualify, but the bad news is that you will pay a lot of money in interest over the life of the loan especially if you do not make an effort to pay the loan off ahead of schedule.
Unless you pay your real estate taxes on your own, your monthly mortgage payment will include a portion to go into escrow to pay your real estate taxes when they are due. Most mortgage companies prefer to pay taxes on behalf of their borrowers because this helps protect their investment.
Homeowners insurance is often escrowed alongside real estate taxes, so if this is the case with your home loan then insurance will be a portion of your monthly payment. This may also include private mortgage insurance (PMI) if this is required by your lender and may also include any additional insurance you signed up for, such as mortgage protection insurance.
The Total Payment
All of these factors make up the total monthly mortgage payment for your home. An online calculator that only takes one or two of these factors into consideration will not provide a very accurate payment estimate, so this is why it is important to look for a PITI calculator when trying to figure out how much your monthly payment will be.
A PITI calculator is not appropriate in all instances. If you do not plan on escrowing your real estate taxes or any insurance, look for a different type of calculator to assist you with your estimates. Also, certain types of loans, such as interest-only loans, will not include all facets of PITI in the monthly payment.
Use a PITI Calculator
There is a good chance that your lender provides a PITI calculator online, but if you want to use a different source or have not yet chosen a lender, you still have plenty of options. Real Estate ABC offers PITI calculators free of charge.
In order to effectively use a PITI calculator you will want to have this information available:
- The amount you will borrow
- The length of the loan in years
- The interest rate, or an estimate
- The annual insurance fees, or an estimate
- The annual taxes, or an estimate
Some calculators will estimate taxes and insurance for you, but it is preferable to already have an idea of what you will be paying for taxes and insurance if you want to obtain a relatively accurate estimate.
Using the calculator is easy. Input the numbers where requested, submit the information, and you will receive an estimate of your monthly PITI mortgage payment. You can then experiment with different numbers, such as the amount of the loan or the length of years the loan is for, in order to get the desired result.
When trying to figure out how much your monthly mortgage payment will be, make sure the calculator you use takes all factors into consideration to give you a more accurate view of what you will actually be paying.