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Breakdown Of Your Monthly Mortgage Payments

We discussed PITI Payments are. In short it is the total payments due on your mortgage.  To recap:

PITI Payments is the components of a mortgage payment.

PPrincipal is the money used to pay down the balance of the loan

IInterest is the charge you pay to the lender for the privilege of borrowing the money

TTaxes refer to the property taxes you pay as a homeowner

I – Insurance refers to both your property insurance and your private mortgage insurance  and homeowners association fees if applicable.

Just bought your house?

What does my mortgage bill look like?

Your mortgage bill will include all of these numbers. You will be making one payment to your bank and they will make the Taxes and Insurance payments for you.

How does that work?

What happens is your bank opens an escrow account for you. Every time that you make your monthly payments, it goes into escrow. Lets make up some numbers.

Mortgage $400,000 @ 4% will equal monthly to ~ $1,900 ($1,909.66, based off of $576.33 in principle and $1,333.33 in interest)

Taxes $12,000 will equal monthly to $1,000

Insurance $1,200 will equal monthly to $100

When your bill arrives all of these charges will be consolidated into one charge of $3,000. When you pay the bill the bank will keep $1,900 of the money and put the other $1,100 into your escrow account. Then would then pay the property taxes quarterly. so after 3 months of collecting your $1,000 taxes they would then ship off $3,000 to your county to cover the property taxes on your home.

The same is true with the insurance on the house. The bank collects the insurance payments from you, and then pays the insurance company the monthly premiums. This setup is great in my opinion. instead of needing to worry about every payment on the house, the bank takes care of it for you.

So, when you hear your friend saying he has a $3,000 mortgage you know that only $575 is actually going to pay off his house and building equity. Pretty depressing if you think about it!

View our home buying series here: Mortgages, Home Loans, Refinance, and Interest

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary

PITI Payments is all the payments lumped together into one monthly obligation.

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PITI Payments: The Maximum Amount Of Money You Can Borrow

PITI Payments (like pity) plays a major roll in your mortgage. Banks and private lenders look at the total number that your mortgage will cost you to ascertain your credit worthiness. This is calculated by a formula known as PITI Payments Ratio.

What is this PITI Payments?

PITI Payments is the components of a mortgage payment.

PPrincipal is the money used to pay down the balance of the loan

IInterest is the charge you pay to the lender for the privilege of borrowing the money

TTaxes refer to the property taxes you pay as a homeowner

I Insurance refers to both your property insurance and your private mortgage insurance  and homeowners association fees if applicable.

Generally, mortgage lenders prefer PITI to be equal to, or less than 28%, of a borrower’s gross monthly income. PITI is usually calculated on a monthly basis by comparing the borrower’s monthly gross income.

Use this Calculator to calculate your numbers

I went ahead and pulled a sample:

Mortgage Summary
Loan amount $400,000.00
Term 30 years
Interest rate 3.75%
Annual home insurance $950.00
Annual property taxes $10,000.00
Monthly payment (PI) $1,852.46
Monthly payment (PITI)* $2,764.96
Total principal and interest payments $666,887.08
Total interest $266,887.08

Based on the information you entered, A $400,000 mortgage your payment is $2,764.96 for 30 years with a rate of 3.75%. After principal and interest the total payments will be $666,887.08!

The yearly payments will look like this:

Payment Schedule

Year Total
Payments
Principal
Paid
Interest
Paid
Ending
Principal
Balance
$400,000.00
1 $22,229.52 $7,355.08 $14,874.44 $392,644.92
2 $22,229.52 $7,635.69 $14,593.83 $385,009.23
3 $22,229.52 $7,927.01 $14,302.51 $377,082.22
4 $22,229.52 $8,229.44 $14,000.08 $368,852.78
5 $22,229.52 $8,543.39 $13,686.13 $360,309.39
6 $22,229.52 $8,869.33 $13,360.19 $351,440.06
7 $22,229.52 $9,207.69 $13,021.83 $342,232.37
8 $22,229.52 $9,558.98 $12,670.54 $332,673.39
9 $22,229.52 $9,923.69 $12,305.83 $322,749.70
10 $22,229.52 $10,302.28 $11,927.24 $312,447.42
11 $22,229.52 $10,695.33 $11,534.19 $301,752.09
12 $22,229.52 $11,103.37 $11,126.15 $290,648.72
13 $22,229.52 $11,526.97 $10,702.55 $279,121.75
14 $22,229.52 $11,966.74 $10,262.78 $267,155.01
15 $22,229.52 $12,423.28 $9,806.24 $254,731.73
16 $22,229.52 $12,897.24 $9,332.28 $241,834.49
17 $22,229.52 $13,389.29 $8,840.23 $228,445.20
18 $22,229.52 $13,900.12 $8,329.40 $214,545.08
19 $22,229.52 $14,430.43 $7,799.09 $200,114.65
20 $22,229.52 $14,980.97 $7,248.55 $185,133.68
21 $22,229.52 $15,552.53 $6,676.99 $169,581.15
22 $22,229.52 $16,145.86 $6,083.66 $153,435.29
23 $22,229.52 $16,761.86 $5,467.66 $136,673.43
24 $22,229.52 $17,401.34 $4,828.18 $119,272.09
25 $22,229.52 $18,065.22 $4,164.30 $101,206.87
26 $22,229.52 $18,754.44 $3,475.08 $82,452.43
27 $22,229.52 $19,469.91 $2,759.61 $62,982.52
28 $22,229.52 $20,212.73 $2,016.79 $42,769.79
29 $22,229.52 $20,983.87 $1,245.65 $21,785.92
30 $22,231.00 $21,785.92 $445.08 $0.00

 

View our home buying series here: Mortgages, Home Loans, Refinance, and Interest

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary

PITI Payments is the components of a mortgage payment. Principle, Interest, Taxes, Insurance.

 

 

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