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PITI Mortgage Terminology Explained: Principal Interest Taxes Insurance

Gustan Cho Associates
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PITI Explained: Principal Interest Taxes Insurance

This BLOG On PITI Explained: Principal Interest Taxes Insurance Was UPDATED On June 17th, 2019

PITI Explained
Gustan Cho Associates

Home Buyers looking to obtain a home loan often will run into mortgage terminologies such as PITI. The term PITI refers to Principal Interest Taxes and Insurance.

  • This BLOG will be useful in understanding mortgage terms
  • Home Buyers will get a good grasp on mortgage concepts, mortgage process and mortgage terms

Breaking Down Florida Mortgage Terms: What is PITI?

Breaking Down Florida Mortgage Terms: What is PITI?
Gustan Cho Associates

When you pay your mortgage loan, you pay for your PITI.

  • PITI is an acronym which stands for Principal, Interest, Taxes, and Insurance, and is often associated with mortgages.
  • Basically, your PITI is everything that comprises your mortgage payment if the US is where you live.
  • Before you enter into a Florida mortgage payment agreement, it’s important for you to first understand what you are fully going to be paying for each month, why, and what your best mortgage rates are for your area and your needs

Florida Mortgage PITI: P for Principal

Florida Mortgage PITI: P for Principal
Gustan Cho Associates

What is the principal?

  • With Florida mortgage loans, the capital sum that is owed to your lender is defined as your principal
  • In simplest terms, once you’ve made your down payment, the principal is merely the rest of the amount that is due to pay for the entire price of your home
  • It’s really as straight forward as that
  • There is, however, a thing called principal repayment, and this can come into play in varying degrees depending on what sort of mortgage your lender is provided you with
  • Depending on the type of Florida mortgage loan you acquire, your lender will most likely offer a loan that is interesting heavy in the beginning and principal rich at the end, or vice versa
  • Many are not equal parts every month, though, as many homeowners find special needs in arranging repayment for their principal in certain ways

Florida Mortgage PITI: Interest

Florida Mortgage PITI: Interest
Gustan Cho Associates

Yep, you guessed it – the ‘I’ is for interest!

  • Understanding interest is one of the very most important things to comprehend fully before obtain a home loan. In technical terms, this ‘I’ actually represents the dollar value sum instead of a rate
  • Calculating mortgage interest in 2019 is different than the past
  • There are many ways in which you can due to the mortgage being amortized
  • What is mortgage amortization?
  • It is a type of mortgage loan wherein the lender arranges the borrower to have a mortgage repayment where they pay a fixed amount throughout the entire mortgage
  • As a result, many people see an advantage in having a fixed rate because their interest rate will remain the same even as inflation affects the economy

Florida Mortgage PITI: Taxes

Florida Mortgage PITI: Taxes
Gustan Cho Associates

The type of taxes referred here is obviously none other than property taxes.

  • This is the most variable of all the factors in PITI and mortgage loan
  • Check with local government to find out the exact property tax rate homeowners should expect to pay in the area

Florida Mortgage PITI: Insurance

Florida Mortgage PITI: Insurance
Gustan Cho Associates

And last but not least is the final ‘I’, which stands for insurance.

  • Understanding insurance is important before speaking with a lender to obtain a Florida mortgage loan
  • Many folks may be misinformed on why it’s actually good to take on paying lender’s insurance
  • When borrowers are able to ensure the lender against the possibility of defaulting on the home and mortgage, the mortgage rate will be cheaper because of the lender’s discretion taken

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