This calculator helps estimate your total monthly housing cost, including Principal, Interest, Property Taxes, and Home Insurance (PITI).
Understanding your complete monthly mortgage payment, including property taxes and insurance, is crucial for responsible home buying. Use this comprehensive calculator to accurately estimate your PITI payment and assess affordability.
Mortgage Calculator with Taxes
Estimated Monthly PITI Payment
Mortgage Calculator with Taxes Formula
1. Monthly Principal & Interest (P&I):
$$M = P_{L} \frac{i(1 + i)^N}{(1 + i)^N – 1}$$
Where:
$$P_{L} = \text{Loan Principal} = \text{Home Price} – \text{Down Payment}$$
$$i = \text{Monthly Interest Rate} = \frac{\text{Annual Interest Rate}}{12}$$
$$N = \text{Total Number of Payments} = \text{Loan Term (Years)} \times 12$$
2. Monthly Taxes (T) & Insurance (I):
$$\text{Taxes (T)} = \frac{\text{Home Price} \times \text{Tax Rate} (\%)}{12}$$
$$\text{Insurance (I)} = \frac{\text{Annual Insurance Cost}}{12}$$
3. Total Monthly Payment (PITI):
$$\text{PITI} = M + T + I$$
Formula Sources: Investopedia, Consumer Finance Protection Bureau
Variables
The calculator uses the following key inputs:
- Home Price: The total purchase price of the property.
- Down Payment: The upfront cash amount paid, which reduces the loan principal.
- Annual Interest Rate: The annual rate charged by the lender (APR).
- Loan Term (Years): The duration over which the loan will be repaid (typically 15 or 30 years).
- Annual Property Tax Rate: The percentage of the home’s value paid in property taxes annually.
- Annual Home Insurance: The yearly cost for hazard insurance, which protects the property structure.
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What is Mortgage Calculator with Taxes?
A Mortgage Calculator with Taxes (often referred to as a PITI calculator) is an essential financial tool that estimates the total monthly cost of homeownership. PITI stands for Principal, Interest, Taxes, and Insurance—the four components that constitute a complete mortgage payment.
While the Principal and Interest (P&I) cover the repayment of the loan itself, the Taxes (Property Taxes) and Insurance (Homeowner’s Insurance) are often collected by the lender and held in an escrow account. This ensures that these recurring, necessary payments are made on time. For this reason, excluding T&I from your budget can lead to a severe underestimate of your true monthly expense.
By including these escrow components, this calculator provides a far more accurate and comprehensive view of affordability, helping prospective homeowners budget realistically and avoid unexpected financial strain after closing.
How to Calculate Your PITI Payment (Example)
- Determine the Loan Principal ($P_{L}$): Subtract the $60,000 Down Payment from the $300,000 Home Price. Result: $240,000.
- Calculate Monthly P&I ($M$): With a 30-year term and a 6.5% rate, the monthly interest rate ($i$) is $0.065/12 \approx 0.005417$. The total payments ($N$) are $30 \times 12 = 360$. Plugging these into the P&I formula yields a monthly payment of approximately $1,516.85.
- Calculate Monthly Property Taxes ($T$): Multiply the $300,000 Home Price by the 1.2% tax rate and divide by 12 months: $(\$300,000 \times 0.012) / 12 = \$3,600 / 12 = \$300.00$.
- Calculate Monthly Home Insurance ($I$): Divide the $1,500$ Annual Insurance Cost by 12 months: $\$1,500 / 12 = \$125.00$.
- Calculate Total PITI: Sum the components: $\$1,516.85 (\text{P\&I}) + \$300.00 (\text{Taxes}) + \$125.00 (\text{Insurance}) = \$1,941.85$.
Frequently Asked Questions (FAQ)
What is PITI?PITI is an acronym for Principal, Interest, Taxes, and Insurance. It represents the four core components of a complete monthly mortgage payment. Principal and Interest repay the loan, while Taxes and Insurance are usually held in an escrow account managed by the lender.
Why is it important to include taxes and insurance in the calculation?Including taxes and insurance is vital because these costs are mandatory and significantly affect your true monthly housing expense. A calculation that only includes Principal and Interest (P&I) will give an artificially low estimate of your monthly budget.
What happens if my property taxes or insurance costs change?If your property taxes or insurance premiums increase (or decrease), your total PITI payment will be adjusted accordingly. Lenders typically conduct an annual escrow analysis to ensure the account has enough funds, leading to a new monthly payment amount.
Does this calculator include Private Mortgage Insurance (PMI)?This calculator does not explicitly include Private Mortgage Insurance (PMI). PMI is typically required if your down payment is less than 20% of the home price. You should manually factor in an estimate for PMI if your down payment falls below this threshold.