Mortgage Basics: How Your Monthly Payment Really Works
Principal, interest, taxes, insurance, and PMI — what actually goes into a house payment, and how to compare offers like a lender does.
The four parts of a payment
A mortgage payment is usually quoted as PITI: Principal (paying back what you borrowed), Interest (the lender's charge), Taxes (property tax, often escrowed), and Insurance (homeowners coverage, plus PMI when your down payment is under 20%). Our mortgage calculator shows each part separately so you can see what you control and what you don't.
Why the term matters more than the rate
Headlines focus on rates, but the term drives the total. On a $320,000 loan at 6.5%, a 30-year term costs roughly $408,000 in interest while a 15-year term costs about $180,000 — for a payment that is only ~50% higher, not 100%. Run both scenarios in the amortization calculator and check the "Total of N Payments" line, not just the monthly figure.
Where PMI comes from and how to kill it
PMI typically costs 0.5–1.5% of the loan per year and protects the lender, not you. It drops off automatically once you reach ~22% equity on conventional loans. A down payment calculator shows exactly how much more cash avoids it. If you are already in a loan, watch your balance in an amortization schedule and request removal as soon as you qualify.
Comparing offers like a lender
Lenders quote rates plus "points" and fees, which makes headlines hard to compare. Convert every offer to its APR — the single number that folds fees into the rate — and compare APRs directly. Then check how long you will keep the loan: points only pay off if you stay past the break-even month.