Last updated: March 2026
Quick Reference
- $350,000 home with 20% down at 6.75% for 30 years = ~$1,817/month (P&I only)
- Total interest paid over 30 years at 6.75% on a $280,000 loan: ~$374,000
- PMI typically costs 0.35%-1.0% of your loan amount annually
- PMI drops off when you reach 20% equity (80% LTV)
- The 28/36 rule: spend no more than 28% of gross income on housing, 36% on total debt
- 15-year rates are typically 0.5-0.75% lower than 30-year rates
Understanding Your Mortgage Payment (PITI)
Your monthly mortgage payment is more than just the loan repayment. Lenders and financial planners use the acronym PITI to describe the four components that make up your total housing payment: Principal, Interest, Taxes, and Insurance.
According to the National Association of Realtors, the median U.S. home price reached $396,900 in 2025, making mortgage calculators one of the most-searched financial tools with over 5 million monthly Google searches.
Principal is the portion of your payment that reduces your actual loan balance. Early in the loan, this is a small fraction of your payment — on a 30-year mortgage at 6.75%, only about 25% of your first payment goes to principal. By year 20, that flips to over 60%.
Interest is what the lender charges you for borrowing the money. It is calculated monthly on your remaining balance. This is why early payments feel expensive — you are paying interest on the full loan amount. As the balance decreases, so does the interest portion.
Taxes (property taxes) vary enormously by location — from 0.3% in Hawaii to over 2% in New Jersey and Illinois. Your lender typically collects 1/12th of your annual property tax each month and holds it in escrow, paying the tax bill on your behalf.
Insurance includes homeowner's insurance (required by all lenders) and potentially PMI if your down payment is under 20%. Homeowner's insurance protects against damage and liability. PMI protects the lender if you default — it is not optional until you reach 20% equity.
Many buyers focus only on the principal and interest payment when shopping for homes, but PITI gives the true picture. A $350,000 home with $1,817/month in P&I might actually cost $2,300-$2,500/month when taxes, insurance, and PMI are included. Always calculate the full PITI before committing to a home price.
Frequently Asked Questions
How much house can I afford on a $75,000 salary?
Using the 28% rule, your maximum monthly housing payment would be $1,750 ($75,000 ÷ 12 × 0.28). At 6.75% for 30 years with 20% down, that supports roughly a $320,000-$340,000 home depending on taxes and insurance in your area.
How is mortgage interest calculated?
Mortgage interest is calculated monthly on the remaining balance. Each month, you pay interest = balance × (annual rate ÷ 12). Early in the loan, most of your payment goes to interest. Over time, the principal portion grows as the balance decreases.
What is PMI and when can I remove it?
Private Mortgage Insurance (PMI) is required when your down payment is less than 20%. It typically costs 0.35%-1.0% of your loan amount annually. PMI is automatically removed when your loan balance reaches 80% of the home's original appraised value.
Should I make extra mortgage payments?
Extra payments go directly to principal, reducing total interest dramatically. Even $100/month extra on a $280,000 loan at 6.75% saves about $50,000 in interest and pays off the mortgage 4+ years early. The earlier you start, the more you save.
What's the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus other costs like origination fees, closing costs, and mortgage insurance — giving a more complete picture of the loan's true cost.
How much does a 1% rate change affect my payment?
On a $280,000 30-year loan, each 1% rate increase adds roughly $165-$180 per month. Going from 6% to 7% increases the monthly P&I payment from about $1,679 to $1,863 — a difference of $184/month or $66,240 over the life of the loan.
Is a 15-year mortgage worth it?
A 15-year mortgage has higher monthly payments but saves enormous amounts in interest. On a $280,000 loan, a 15-year at 6.0% costs $2,363/month vs $1,817/month for 30 years at 6.75%. But total interest drops from $374,000 to $145,000 — saving over $229,000.