Our PITI calculator helps you evaluate the total monthly cost of your mortgage, which is crucial when you want to determine how much money you can afford to borrow to buy a new house. Here you can not only learn how to calculate PITI but also understand what PITI is and why it matters.

What is PITI?

PITI is an acronym of:

  1. Principal - the amount of your loan (not including interest). Most likely, it is the cost of your house minus your down payment.
  2. Interest - the rate at which the lender charges you for borrowing money. To learn more, check out our interest rate calculator.
  3. Tax - property tax charged at the municipal level. You can find the exact amount on the website of the county where the house is located, or get it from your real estate agent.
  4. Insurance - protection for your property in case of fire, lightning, break-in, flooding, random acts of God, etc. Most often, it is not required by law, yet demanded by the lender.

Taking all of these into account, the PITI mortgage calculator gives you an accurate idea of your loan's monthly repayments.

Why does PITI matter?

PITI allows you to calculate your Debt-to-Income (DTI) ratio, which helps determine what amount of money you can safely borrow. The specific maximum value of DTI that will be deemed acceptable by a lender depends on your region, yet most lenders use the DTI 28% rule as a first estimate when they decide whether or not to loan you money.

How to calculate PITI?

Based on the principal loan amount, interest rate, the annual tax amount and insurance cost, our calculator determines your PITI using the following formula:

PITI = monthly tax + monthly insurance + monthly mortgage payment

where:

  1. Monthly tax is your annual tax amount divided by 12.
  2. Monthly insurance is your annual insurance cost divided by 12.
  3. Monthly mortgage payment is calculated based on your principal loan amount and annual interest rate. How? We have a mortgage payment calculator for that :)

For instance, let's assume that each year $3,600 is needed to cover the property tax, and the insurance cost is $1,200. Your expected monthly tax and insurance costs are therefore equal to $3600 / 12 = $300 and $1200 / 12 = $100, respectively. If you borrow $200,000 for 30 years at 7%, your monthly mortgage payment will be %1,330.60. All that's left to do is to add together these three terms to get your PITI estimation: PITI = $300 + $100 + $1330.60 = $1730.60

How does our PITI mortgage calculator work?

The exact formula implemented in this PITI calculator is:

PITI = t / 12 + i / 12 + P * r / 12 * (1 + r / 12)ⁿ / [(1 + r / 12)ⁿ - 1]

where:

  • t is the annual tax amount, so t/12 is the monthly tax amount.
  • i is the annual insurance cost, so i/12 is the monthly insurance cost.
  • P is the principal loan amount.
  • r is the annual interest rate. Hence, r/12 is the monthly interest rate.
  • n is the number of monthly repayments.

Note that the term P * r / 12 * (1 + r / 12)ⁿ / [(1 + r / 12)ⁿ - 1] is the exact same formula as the loan payment formula, where an amount, P, is borrowed for n months at an annual rate, r.

Anna Szczepanek, PhD candidate

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