Your mortgage payment, line by line

Your monthly mortgage payment is four things in a trench coat pretending to be one number. Once you can see the four, every decision about your home gets easier: refinancing, prepaying, dropping PMI, appealing your tax bill.

The four pieces (PITI)

P is principal

The part that actually pays down your loan balance. In the first year of a 30-year mortgage, this is a surprisingly small slice. It grows every month.

I is interest

What the bank charges you for the loan, calculated on the remaining balance each month. Early in the loan this is most of the payment. Late in the loan it is almost nothing. This is why paying an extra dollar of principal in year two saves you far more interest than paying an extra dollar in year twenty.

T is taxes

Property tax, collected monthly by the lender into an escrow account, then paid to the county on your behalf twice a year. Reassessment can move this number. So can a successful appeal.

I is insurance

Homeowners insurance, also collected into escrow. In flood, fire, or hurricane zones, this line item has been the loudest mover in the entire payment for the last few years.

Sometimes a fifth: PMI

Private mortgage insurance, required when you put less than 20 percent down on a conventional loan. It protects the lender, not you. You can request removal when your loan-to-value ratio drops to 80 percent, and the lender must remove it automatically at 78 percent.

A worked example

A 400,000 dollar loan at 6.5 percent on a 30-year fixed, plus taxes and insurance on a home in a typical market:

• Principal and interest: about 2,528 per month
• Property tax at 1.1 percent of value: about 458 per month
• Homeowners insurance: about 150 per month
• PMI at 0.5 percent (if you put less than 20 percent down): about 167 per month
• Total PITI: about 3,303 per month

What to do with this

1. Ask your lender for the current amortization schedule. Every month is broken out. It is free and it is a revelation.
2. Check the tax and insurance lines each fall when escrow re-runs. Big jumps are common in 2025 and 2026, and you can protest the tax portion.
3. If you are past 78 percent LTV, confirm PMI has dropped. It sometimes lingers.
4. Before you refinance, model the break-even in months. Divide closing costs by monthly savings. If you will move before that many months, refinance is a loss.