Understanding Your Mortgage Payment
What goes into your monthly payment — and what to expect when you get your first bill.
Your mortgage payment is more than one number. Here’s how it’s broken down so you can budget accurately and know what to expect.
The Four Parts of Your Payment (PITI)
Lenders often refer to your payment as PITI — principal, interest, taxes, and insurance. Together they make up your total monthly payment.
Principal
The amount that pays down your loan balance. Early in the loan, a smaller share of each payment goes to principal; over time, more of your payment builds equity.
Interest
What the lender charges for borrowing the money. Your rate determines how much of each payment goes to interest vs. principal.
Taxes (Property Taxes)
Usually collected with your payment and held in an escrow account. When the bill is due, the lender pays it. Rates vary by parish in Louisiana.
Insurance (Homeowner’s Insurance)
Typically required by the lender and collected monthly via escrow. In Louisiana, flood insurance may also be required depending on location.
Other Costs You Might See
Depending on your loan type and location, your monthly payment may also include:
- PMI (private mortgage insurance) — Conventional loans with less than 20% down typically include PMI until you reach 20% equity. VA loans do not require PMI.
- FHA mortgage insurance premium (MIP) — FHA loans include an upfront premium at closing and a monthly mortgage insurance premium for the life of the loan (or until certain conditions are met).
- USDA guarantee fee — Rural Development (USDA) loans may have an annual fee that’s paid monthly with your payment.
- Flood insurance — Required in many Louisiana areas. Lenders often collect it with your payment and pay it from escrow when due.
Your first payment can look different because of per diem interest or escrow setup. Your Loan Estimate and Closing Disclosure show the payment you can expect going forward.
Why Your Payment Can Change
Your principal and interest stay the same on a fixed-rate loan. Taxes and insurance can change. If your property taxes or insurance go up, your lender may adjust your escrow and your total monthly payment at the annual escrow review.
Understanding this upfront helps you plan. When we run your numbers, I’ll walk you through exactly what your payment includes — so there are no surprises.
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