The other day a Client asked me what was included in their payment? I replied everything. They asked again and I realized that although my Answer was correct they still didn’t know what I was talking about so here it is, the break down and a full explanation.

You might here a mortgage professional say PITI or PITIMI when talking about your monthly payment. This refers to your monthly payment meaning Principle, Interest, Taxes, and Insurance. Most loans however require some form of mortgage insurance so your payment will also include that.

Here is the break down:

Principle- The amount that goes toward paying your loan down.

Interest- This is the cost of borrowing the money.

Taxes- divide your annual tax amounts by 12 to get your monthly tax payment.

Insurance- This is your annual home owners or Hazard insurance divided by 12

PMI or MIP- This is insurance typically required with less than 20% down. Also required on all FHA loans.