What’s in a Monthly Mortgage Payment? A Simple Breakdown

By Barrett Mortgage Group

Owning a home is a major milestone—but managing your monthly mortgage payment is just as important. At Barrett Mortgage Group, we believe that understanding exactly where your money goes each month helps you make informed financial choices. Let’s take a closer look at what makes up a typical mortgage payment.

The Four Core Elements: PITI

Most mortgage payments include four main parts, often referred to as PITI:

1. Principal

This is the portion of your payment that goes toward reducing your loan balance. Over time, as you continue making payments, more of your money will apply to the principal.

2. Interest

Interest is the cost you pay to borrow money from your lender. It’s based on your loan’s interest rate, which can vary depending on factors like your credit score and the current market.

3. Taxes

Property taxes are charged by your local government and are based on your home’s value. These payments are typically collected monthly and held in an escrow account, then paid on your behalf when due.

4. Insurance

This includes:

• Homeowners insurance, which protects your home against damage or loss.

• Private mortgage insurance (PMI), which may be required if your down payment is less than 20%. PMI helps protect the lender in case of loan default.

What Is an Escrow Account?

An escrow account is a tool used to hold and manage your property tax and insurance payments. Instead of paying these costs all at once, your lender collects a portion each month and makes the payments for you when they’re due. It’s a way to stay organized and avoid large bills.

Other Costs That May Be Included

Beyond PITI, there could be additional expenses depending on your situation, such as:

• HOA dues, if your property is part of a homeowners association.

• Mortgage insurance premiums (MIP) for certain loan types, like FHA loans.

• Extra principal payments, if you choose to pay more toward your loan balance each month to reduce overall interest.

Reading Your Statement

Your mortgage statement provides a detailed snapshot of how your payment is applied. It shows how much goes toward principal, interest, escrow, and other charges. Reviewing it regularly can help you track your progress and manage your budget effectively.

We're Here to Help

At Barrett Mortgage Group, we do more than just offer home loans—we educate and guide our clients every step of the way. Whether you’re buying your first home or refinancing, we’re here to help you understand your payment and find a mortgage that fits your financial goals.

Have questions? Reach out to our team—we’re happy to assist you.