How Mortgage Payments Are Calculated (Principal, Interest, Taxes & Insurance)
September 18, 2026
A typical monthly mortgage payment has four components, often abbreviated PITI: Principal, Interest, Taxes, and Insurance. Only the principal and interest portion is fixed by your loan terms — taxes and insurance can change your total payment even on a fixed-rate mortgage.
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Open the Mortgage Calculator →The Four Parts of a Mortgage Payment (PITI)
- Principal — pays down the actual loan balance
- Interest — the cost of borrowing, charged on the remaining balance
- Taxes — property taxes, usually collected monthly into an escrow account and paid to the local government annually
- Insurance — homeowners insurance (and PMI if applicable), also often collected via escrow
How the Principal & Interest Portion Is Calculated
Principal and interest use the same amortization formula as any installment loan: Payment = P × [r(1+r)^n] / [(1+r)^n − 1]. This part of your payment is fixed for the life of a fixed-rate mortgage, and like any amortizing loan, early payments go mostly toward interest since the balance is highest at the start.
Why Property Tax and Insurance Change Your Payment Over Time
Even with a fixed interest rate, your total monthly payment can still change, because the tax and insurance portions held in escrow are re-estimated periodically based on actual property tax assessments and insurance premiums, both of which can rise (or occasionally fall) independent of your loan terms.
What Is PMI and When Does It Go Away?
Private Mortgage Insurance (PMI) is typically required when a down payment is below 20% of the home's value, and it protects the lender, not the borrower, in case of default. PMI can usually be removed once you've built up 20% equity in the home, either through payments, appreciation, or both — check your loan servicer's specific process for requesting removal.
Frequently Asked Questions
What does PITI stand for?
Principal, Interest, Taxes, and Insurance — the four components typically bundled into a single monthly mortgage payment.
Why did my mortgage payment go up if I have a fixed rate?
The fixed-rate part (principal and interest) doesn't change, but the escrowed taxes and insurance portion is re-estimated periodically and can increase if your property's assessed value or insurance premium goes up.
What is PMI and how do I get rid of it?
PMI (Private Mortgage Insurance) is typically required with less than 20% down and protects the lender against default. It can usually be canceled once you reach 20% equity — contact your loan servicer about their specific removal process.
How much of my early mortgage payments go to interest?
A large share, since interest is calculated on the outstanding balance and that balance is highest at the start of the loan — the split gradually shifts toward more principal and less interest as the loan matures.
What's the difference between a 15-year and 30-year mortgage?
A 15-year mortgage has a higher monthly payment but pays significantly less total interest and builds equity faster; a 30-year mortgage has a lower, more manageable payment but costs more in total interest over the life of the loan.