Understanding your mortgage payment
Most lenders quote PITI: Principal, Interest, Taxes and Insurance. In the early years most of each payment goes to interest. Over time the balance shrinks and more of it goes to principal. The year-by-year chart shows that shift.
- PMI (private mortgage insurance) is usually required with less than 20% down on a conventional loan. It typically drops off once you owe 78% of the home's original value.
- Extra payments go straight to principal and can cut years and tens of thousands of dollars of interest.
- The 28/36 guideline: lenders like housing costs under 28% of gross income, and all debts under 36%.
The rate starts at this week's national average from Freddie Mac. Your actual rate depends on your credit score, down payment, loan type and points.
Have a lump sum and want a lower monthly payment instead of an earlier payoff? Try the Mortgage Recast Calculator.