Your Mortgage Payment, Decoded: PITI, Rates, and the 30-Year Math

PITI: the four pieces of a payment

A full mortgage payment is PITI: Principal, Interest, Taxes, and Insurance. Principal and interest repay the loan itself; property tax and homeowner's insurance are usually collected monthly into an escrow account and paid by the lender on your behalf.

On a $350,000 home with 20% down at 6.5% for 30 years, the P&I is about $1,770 — but with typical tax and insurance the real monthly outlay is closer to $2,245. Budgeting off the P&I alone is the classic first-time buyer mistake. And below 20% down, PMI adds another $70–350 a month.

What one percentage point really costs

Because mortgages are large and long, small rate differences compound into staggering sums. That same $280,000 loan costs about $186 more per month at 7.5% than at 6.5% — roughly $67,000 over 30 years. That's a luxury car's worth of money for the same house.

This is why shopping at least three lenders matters, and why points (prepaid interest that buys a lower rate) can make sense if you'll keep the loan long enough to break even — usually 5–7 years.

15-year vs. 30-year

The 15-year loan typically carries a rate about half a point lower and cuts total interest by more than half — but the payment on our example jumps from $1,770 to about $2,410. That difference, invested monthly instead, historically beats the interest saved. The honest answer is that the 30-year with disciplined extra payments gives you the same option with an escape hatch.

One extra monthly payment per year on a 30-year mortgage pays it off roughly 4–5 years early and saves tens of thousands in interest — make sure the lender applies extras to principal.

How much house can you afford?

The 28/36 rule remains the standard: total housing costs at or under 28% of gross monthly income, and all debt payments combined under 36%. On $100,000 a year, that's a $2,330 housing budget — which, at current rates, buys meaningfully less house than most people expect. Run the numbers before falling in love with a listing.