Your monthly payment is the sum of four factors, commonly referred to as PITI (Principal, Interest, Taxes, Insurance). You may also be required to pay PMI (Private Mortgage Insurance) on a monthly basis.
- Principal - The amount applied to the loan balance.
- Interest - The charge paid for borrowing money.
- Taxes - Property taxes, which may also be paid separately to your local government.
- Insurance - Lenders require you to maintain adequate insurance to protect your home. This may also be paid separately.
- PMI – Insurance that protects your lender against some or most of the losses that would occur if you default on your loan.