Written By: Kelly Jaunet Jones
Mortgage Payment = Principal + Interest + Property Taxes + Homeowners' Insurance
Your Monthly Mortgage Payment has four parts known as PITI:
During the pre-approval process, the higher the amount you borrow, the higher your payment will be. During the life of the loan, the more additional payments you make, the lower the principal will be. That could take years off your loan.
Interest is a significant part of your monthly mortgage payment, especially in the early years of your loan. It calculates as a percentage of the remaining principal. Over time, as the principal decreases, the interest portion of your payment also decreases. Making extra payments can significantly reduce the total interest paid over the life of the loan.
Property taxes are often included in your mortgage payment. You could pay 1/12 of your monthly yearly taxes into an escrow account. For example, let's say your yearly taxes are $1,200, and you pay $100 monthly as a part of your mortgage payment. The lenders collect these payments and hold them in an escrow account until they are due. When your taxes come due, they are paid out of your escrow account on your behalf.
To learn more about property taxes in your area, check out this article from the Tax Foundation: "Property Taxes by State and County, 2026."
Homeowners Insurance (HOI) works the same way. You could pay 1/12 of your monthly HOI premium into an escrow account. An example could be that your yearly HOI premium is $1,200, and you pay $100 monthly as a part of your mortgage payment. The lenders collect these payments and hold them in an escrow account until they are due. When your HOI premium comes due, they are paid out of your escrow account on your behalf.
Additional Tips for Managing Your Mortgage:
Q: What is included in a mortgage payment?
A: Your mortgage payment could consist of the principal (amount borrowed from your lender), interest on your loan, property taxes, and homeowners' insurance or private mortgage insurance (PMI).
Q: Does how much I borrow affect what my monthly payment will be?
A: Yes, your monthly payment could increase if you choose to borrow more money. That's why how much you put towards your down payment could make a significant difference in what you're expected to pay each month.
Q: What impact do property taxes have on my mortgage?
A: Property taxes vary state-to-state and are one of the things that could be included in your monthly payment. Depending on what county and state you live in, these taxes will increase or decrease, so it's important that you're aware of what the rate is in the county you're buying your new home.
Q: What are some ways I can better manage my mortgage?
A: To ensure you're managing your mortgage well, be sure to consistently monitor your credit score, make extra payments to pay it off faster, be watchful for changes in rates to see if refinancing is an option, and utilize a mortgage calculator to make sure you're staying on track.
Buying a new home can be intimidating, but it doesn't have to be! If you want to know what kind of mortgage payment you can afford, contact our Mortgage Champions.
Learn more about homeownership in our free Step-By-Step Guide to Get Pre-Qualified for Your Mortgage.
Check out "How to Buy Your First Home in 2 Years: Step-By-Step Guide."
Leaders Credit Union is federally insured by the NCUA and an equal housing lender.