This calculator provides a comprehensive estimate of your total monthly housing costs, including Principal, Interest, Property Taxes, and Homeowner’s Insurance (PITI). Knowing your PITI helps you budget accurately and understand the true cost of homeownership.
Mortgage Calculator Including Taxes and Insurance
Mortgage Calculator Including Taxes and Insurance Formula
The total monthly payment (PITI) is the sum of four components: Principal & Interest (P&I), Monthly Property Taxes, and Monthly Insurance.
1. Principal & Interest (P&I) Calculation:
$$M = P \left[ \frac{i(1+i)^n}{(1+i)^n - 1} \right]$$
Where:
M = Monthly Principal & Interest Payment
P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 12)
n = Total number of payments (Loan Term in Years * 12)
2. Total Monthly Payment (PITI):
PITI = M + (\text{Annual Tax}/12) + (\text{Annual Insurance}/12)
Source: CFPB – Owning a Home | Investopedia – Mortgage
Variables Used in the Calculator
- Loan Amount: The total amount of money borrowed from the lender (Principal). This excludes your down payment.
- Annual Interest Rate (%): The yearly cost of borrowing money, expressed as a percentage.
- Loan Term (Years): The duration over which the loan will be repaid (e.g., 15, 20, or 30 years).
- Annual Property Tax ($): The estimated yearly property tax assessed by local government, typically collected monthly by the lender.
- Annual Home Insurance ($): The yearly premium for homeowner’s insurance, also typically collected monthly via an escrow account.
Related Calculators
Explore other financial tools to better manage your budget and homeownership journey:
- Debt-to-Income (DTI) Ratio Calculator
- Home Affordability Calculator
- Refinance Savings Calculator
- Amortization Schedule Calculator
What is Mortgage Calculator Including Taxes and Insurance?
A Mortgage Calculator Including Taxes and Insurance, often referred to as a PITI calculator, provides the most realistic picture of your potential housing expenses. PITI stands for Principal, Interest, Taxes, and Insurance. While Principal and Interest make up the loan repayment itself, Taxes (Property Taxes) and Insurance (Homeowner’s Insurance) are mandatory, ongoing costs of homeownership that are usually collected by the lender into an escrow account and paid out annually.
By aggregating all four components, the calculator helps prevent “payment shock.” Many first-time homebuyers might focus only on the Principal and Interest portion, underestimating the full monthly obligation. Using a PITI calculator ensures you budget for the total cash flow required each month, which is crucial for determining true home affordability and securing loan approval.
How to Calculate Mortgage Including Taxes and Insurance (Example)
- Determine P&I Payment (M): Start with the loan amount, interest rate, and term to find the monthly Principal and Interest payment using the formula $M = P \left[ \frac{i(1+i)^n}{(1+i)^n – 1} \right]$.
- Calculate Monthly Tax (T): Take the Annual Property Tax and divide it by 12. For an annual tax of $3,000, the monthly tax is $3,000 / 12 = $250.00.
- Calculate Monthly Insurance (I): Take the Annual Home Insurance premium and divide it by 12. For an annual premium of $800, the monthly insurance is $800 / 12 \approx $66.67.
- Sum the Components: Add the P&I payment (M), Monthly Tax (T), and Monthly Insurance (I) to get the total Monthly PITI Payment. If M is $1,600.00, the PITI would be $1,600.00 + $250.00 + $66.67 = $1,916.67.
Frequently Asked Questions (FAQ)
How do lenders use the PITI calculation?
Lenders use the total PITI payment to calculate your Debt-to-Income (DTI) ratio. This ratio, which compares your total monthly debt payments (including PITI) to your gross monthly income, is a key factor in determining whether you qualify for a mortgage loan.
Is Private Mortgage Insurance (PMI) included in this calculation?
PMI is a fifth component sometimes required if your down payment is less than 20% of the home price. It is not explicitly included in the standard PITI calculation but may be added by the lender. This calculator assumes you either paid 20% down or are only focusing on the four primary components.
Why is the Annual Tax and Insurance divided by 12?
Property taxes and insurance premiums are annual costs. By collecting 1/12th of the total each month, the lender ensures that the required lump sum is available in the escrow account when the tax or premium payment is due.
Can my PITI change over time?
Yes. The Principal and Interest portion remains fixed for a fixed-rate mortgage. However, the Taxes (T) and Insurance (I) portions can change annually based on property reassessments and insurance premium adjustments. This will change your overall monthly PITI payment.