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Understanding PITI

Key Takeaways

✓PITI = Principal, Interest, Taxes, Insurance—your full monthly payment
✓Your mortgage payment is just principal and interest; PITI is the real cost
✓Taxes and insurance can increase over time, even with a fixed-rate mortgage

What is PITI?

PITI stands for Principal, Interest, Taxes, and Insurance—the four components of your total monthly housing payment. When a lender tells you your mortgage payment is $1,200, that's often just principal and interest. Add taxes and insurance, and your real payment might be $1,500+.

PITI breakdown showing Principal, Interest, Taxes, and Insurance components

Breaking Down Each Component

Principal reduces your loan balance—this builds equity. Interest is what you pay the lender for borrowing. Property taxes fund local services (schools, roads). Insurance includes homeowner's insurance and possibly PMI and flood insurance. Lenders often collect taxes and insurance monthly in an escrow account.

Why PITI Can Change

Even with a fixed-rate mortgage, your PITI can change. Property taxes may increase as values rise. Insurance premiums can go up. Your escrow account is reviewed annually and adjusted. Budget for potential increases—a fixed rate locks only the interest portion.

🏠 Kentucky Property Taxes

Kentucky has relatively low property taxes—typically 0.8-1.2% of home value annually. A $180,000 home might have taxes around $1,800/year ($150/month). Rates vary by county, so check specific rates for your target area at the Kentucky Department of Revenue.

✅ Your Next Step

When comparing homes, calculate the full PITI for each—not just the mortgage payment—to understand true monthly costs.

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