This comprehensive calculator provides an accurate estimate of your total monthly mortgage payment, including the four major components: Principal, Interest, Property Taxes, and Homeowner’s Insurance (PITI). Use it to budget accurately for your new home.
Mortgage Calculator with Taxes and Insurance
Estimated Total Monthly Payment (PITI)
Mortgage Calculator with Taxes and Insurance Formula
The total monthly payment (PITI) is the sum of four components:
PITI = P&I + T + I
Where:
1. Monthly P&I (Principal & Interest) Payment:
M = P * [ i(1 + i)^n / ((1 + i)^n - 1) ]
2. Monthly Tax Payment:
T = Annual Property Taxes / 12
3. Monthly Insurance Payment:
I = Annual Homeowner's Insurance / 12
Source: Investopedia – PITI Calculation Source: Bankrate – Mortgage Calculator Breakdown
Variables Explained
Understanding the inputs ensures you get the most accurate result:
- Purchase Price: The total price of the home you plan to buy.
- Down Payment: The upfront amount you pay toward the purchase. The loan principal is this subtracted from the purchase price.
- Annual Interest Rate (%): The yearly rate charged on the loan balance.
- Loan Term (Years): The duration of the loan, typically 15 or 30 years.
- Annual Property Taxes ($): The estimated yearly cost of property taxes for the home.
- Annual Homeowner’s Insurance ($): The estimated yearly premium for your homeowner’s policy.
Related Calculators
Explore other essential financial tools:
- Amortization Schedule Calculator
- Rent vs. Buy Calculator
- Debt-to-Income Ratio Calculator
- Early Mortgage Payoff Calculator
What is Mortgage Calculator with Taxes and Insurance?
A standard mortgage payment calculation usually only provides the Principal and Interest (P&I) portion of your loan. However, the true cost of homeownership, especially when using an escrow account, is the PITI payment. PITI stands for Principal, Interest, Taxes, and Insurance.
The Principal and Interest components go directly to the lender to pay down the loan and the interest charged. The Taxes (Property Tax) and Insurance (Homeowner’s Insurance) components are typically collected by the lender each month and held in a separate escrow account. The lender then uses this escrow money to pay the tax bill and insurance premiums when they come due, ensuring the property is protected and taxes are current.
How to Calculate Mortgage Calculator with Taxes and Insurance (Example)
Let’s use an example to calculate the total monthly payment for a $300,000 home with a 20% down payment, a 30-year loan at 6.5% interest, $4,500 in annual taxes, and $1,200 in annual insurance.
- Determine Loan Amount (P): $300,000 (Price) – $60,000 (20% Down) = $240,000.
- Calculate Monthly Rate (i) & Payments (n): $0.065 / 12 = 0.0054167 (i). 30 years * 12 months = 360 payments (n).
- Calculate P&I Payment (M): Using the P&I formula, the monthly P&I is approximately $1,516.85.
- Calculate Monthly Taxes (T): $4,500 / 12 = $375.00.
- Calculate Monthly Insurance (I): $1,200 / 12 = $100.00.
- Calculate Total PITI: $1,516.85 (P&I) + $375.00 (Taxes) + $100.00 (Insurance) = $1,991.85.
Frequently Asked Questions (FAQ)
What is the difference between P&I and PITI?
P&I is the monthly payment covering only the loan Principal and Interest. PITI is the complete monthly payment, adding Property Taxes and Homeowner’s Insurance to P&I. PITI is the true total amount you send to your lender or servicer each month.
Is Private Mortgage Insurance (PMI) included in this calculator?
No, this calculator does not automatically include PMI. PMI is generally required when the down payment is less than 20%. If you need to include PMI, you should add your estimated annual PMI premium to the “Annual Homeowner’s Insurance” input for an approximate PITI calculation.
What is an escrow account?
An escrow account is a third-party account managed by your mortgage servicer. It collects funds monthly from your PITI payment to cover annual property taxes and insurance premiums, ensuring these large, irregular payments are covered on time.
Why are property taxes and insurance important to a lender?
Lenders require proof of insurance to protect their investment against damage (fire, storm, etc.). They also require taxes to be paid because unpaid property taxes can result in a lien that takes priority over the mortgage, threatening the lender’s security.