The short answer
A typical monthly mortgage bill may include principal, interest, property taxes and homeowners insurance—often called PITI. Mortgage insurance can be another monthly expense. Homeowners association (HOA) dues are usually billed separately, but still belong in your housing budget. Which charges actually appear on your mortgage statement depends on your loan and escrow arrangements.
Principal and interest: paying back the loan
Principal is the money you borrowed; each principal payment reduces the balance. Interest is what the lender charges on that balance. On a standard fixed-rate, fully amortizing mortgage, the scheduled principal-and-interest payment generally stays level, while its mix shifts toward principal as the balance falls. See how the mix changes in an amortization schedule.
Property tax and homeowners insurance
Property taxes are set by local authorities and can change over time. Homeowners insurance premiums can change as well. Many borrowers pay a monthly portion of both into an escrow account; the loan servicer then pays the bills when due. If you pay them yourself instead, set aside funds in your budget. An escrow adjustment can change the total monthly bill even when the interest rate is fixed.
Mortgage insurance and HOA dues
Depending on your loan and down payment, you may also owe mortgage insurance. This protects the lender, not your home, and is separate from homeowners insurance. Check your Loan Estimate for the applicable amount and terms. If a property has HOA dues, include them in your budget even if they are paid directly to the association rather than collected with the mortgage. Utilities, maintenance and repairs are additional housing costs not captured by PITI.
A simple monthly example
Suppose your estimated principal and interest is $2,000/month, property tax is $3,000/year and homeowners insurance is $1,200/year. That is $250/month in tax plus $100/month in insurance, bringing the estimate to $2,350/month before any mortgage insurance or HOA dues. These figures are illustrative, not a quote.
Use the mortgage calculator to enter your own home price, down payment, rate, term, property taxes, insurance and HOA dues. Its payment breakdown is an estimate and does not calculate mortgage insurance, closing costs or changes in taxes and premiums.
Before comparing offers
Review each lender’s Loan Estimate for the interest rate, monthly principal and interest, mortgage insurance, estimated escrow, upfront closing costs and cash to close. Compare the total monthly payment, not just the advertised principal-and-interest figure. Your actual escrow and other costs can change later.