PITI and PMI: the payment ads skip

If you search “mortgage payment calculator” in the United States, you will find tools that ask for price, rate, and term — then print a number that looks comfortably close to rent. That number is usually principal and interest only. Your servicer will likely draft more.

PITI is the four-part housing payment: principal (loan balance going down), interest (the lender’s yield), taxes (property tax held in escrow in most states), and insurance (homeowners policy, also often escrowed). Add PMI when you put less than 20% down on many conventional loans, and HOA dues if the community bills them. Together they are the number that has to fit next to groceries and a car payment.

Why escrow exists

Counties want property tax on time. Insurers want a policy in force to protect the collateral. Lenders reduce that risk by collecting 1/12 of estimated tax and insurance each month, then paying the bills when they come due. They also hold a cushion of extra months in many states, within limits set by federal escrow rules. Your first year payment can be higher than a naive “annual tax divided by 12” because of that cushion and because the first tax bills may not match the assessor’s later valuation.

If tax assessments jump, your payment can re-amortize upward even if the interest rate never moved. That is not a calculator bug; it is how U.S. escrow analyses work. A shortage means a lump-sum request or a higher monthly draft until the account catches up. A surplus can mean a refund. Shop a house using last year’s tax bill, then ask the title company what the next assessment is likely to be — especially on new construction, where the first full tax year can surprise buyers.

PMI is a down-payment cost, not “your insurance”

Private mortgage insurance protects the lender, not you. Pricing depends on credit score, loan-to-value, and whether PMI is borrower-paid monthly, upfront, or lender-paid (often baked into the rate). A common planning estimate is roughly 0.5%–1% of the loan per year, billed monthly. That is a sketch, not your Loan Estimate line.

On many conventional loans you can request cancellation around 20% equity based on the original value or a new appraisal, depending on the servicer’s rules. Under the Homeowners Protection Act, servicers must terminate PMI on qualifying single-family conventional loans when the balance is scheduled to reach 78% of the original value, if you are current. FHA loans use mortgage insurance premiums with different duration rules; VA and USDA have their own structures. Do not mix those products in your head while using a conventional PMI toggle.

Putting 20% down to skip PMI is not automatically the cheapest cash decision. Sometimes a smaller down payment plus PMI, with leftover cash in reserves, is safer than arriving at closing with an empty emergency fund. Run both. Watch the total monthly number, not only the interest rate.

State tax is not a rounding error

Effective property-tax rates differ widely. A $425,000 house in Texas is a different monthly obligation than the same price in a low-rate county in Colorado or Hawaii. National averages hide that. Our mortgage calculator fills a statewide typical rate when you pick a state; override it with the county figure from the listing or the tax assessor once you have an address.

Homeowners insurance is equally local: hail, wind, and wildfire maps move premiums more than your credit union’s “$100 a month” placeholder. Type a quote if you have one. HOA dues are never in PITI unless you add them; they still leave the checking account.

A worked example

Price $425,000, 6.5% thirty-year fixed, 10% down in Texas, $2,400/year insurance, no HOA. Principal and interest on the $382,500 loan is only part of the bill. Property tax at a Texas-like effective rate can add several hundred dollars a month. PMI on a 90% LTV loan adds more. Toggle the 20% down chip: the loan shrinks, PMI can vanish, and tax is unchanged because it follows the house, not the down payment. That single change is often worth more than arguing over an eighth of a point on rate.

Interest in year one is front-loaded. An amortization table that shows almost no principal in month one is normal, not a trick. Extra principal payments later change that path; extra escrow does not pay down the loan.

What the calculator will not do

• Discount points, origination fees, or whether you roll closing costs into the loan.
• Flood insurance, windstorm policies, or an escrow cushion in months.
• Your exact PMI rate from the investor’s grid.

Use the Loan Estimate. Then use our tool to stress-tax and insurance so the first escrow analysis is not the first time you see the real draft.