What Does a Mortgage Actually Cost Every Month? (Real Numbers, No Fluff)

The Four Parts of a Mortgage Payment (PITI)

You found the house. You love it. The listing says $350,000. Your brain immediately starts doing math: "If I put 20% down, that's $70,000. The loan is $280,000. At 6.5% interest... how much is that per month?"

Most people get this wrong. Not by a little — sometimes by $400 or $500 a month. That gap is the difference between a comfortable life and financial stress every single month.

Your mortgage payment has four parts, and lenders call it PITI:

P — Principal: The portion that reduces your loan balance. In the early years, this is surprisingly small.

I — Interest: What the bank charges for lending you money. This is most of your payment in the early years.

T — Taxes: Property taxes, usually collected monthly and held in escrow. Varies wildly by location.

I — Insurance: Homeowner's insurance. Required by every lender. Usually $100–$200/month.

There's a fifth component many first-time buyers forget:

PMI — Private Mortgage Insurance: If your down payment is less than 20%, you pay this. It's typically 0.5%–1.5% of the loan per year, added to your monthly payment.

A Real Example: $350,000 Home

Let's say you're buying a $350,000 home. You put down 10% ($35,000). Your loan is $315,000 at 6.75% for 30 years.

Here's what your payment actually looks like:

That's $710/month more than the principal and interest alone. This is why people get shocked at closing.

How Interest Works (And Why Early Payments Feel Pointless)

Here's something that bothers a lot of people: in month 1 of that $315,000 loan at 6.75%, your payment breaks down like this:

• Interest: $1,771
• Principal: $272

You paid $2,043 and only reduced your loan by $272.

By month 360 (your last payment), it flips: Interest: $14, Principal: $2,029.

This is called amortization. It's not a scam — it's just how compound interest works in reverse. The good news is that every extra dollar you pay toward principal saves you significant interest over time.

How Property Taxes Affect Your Payment

Property taxes vary enormously. The national average is about 1.1% of home value per year, but:

• New Jersey: ~2.2% (one of the highest)
• Hawaii: ~0.3% (one of the lowest)
• Texas: ~1.8%
• California: ~0.7%

On a $350,000 home, the difference between a 0.5% and 2% tax rate is $437/month. Always look up the actual property tax rate for the specific area you're buying in.

When Does PMI Go Away?

PMI disappears once you reach 20% equity in your home. That happens two ways:

1. You pay down the loan to 80% of the original purchase price
2. Your home appreciates in value (you'll need a new appraisal)

On that $315,000 loan, you'd need to pay it down to $280,000 (80% of $350,000) to request PMI removal. At normal payment pace, that takes about 8–9 years.

The 28% Rule: How Much Is "Safe" to Spend?

Financial advisors often recommend keeping your total housing payment (PITI) under 28% of your gross monthly income. If your household earns $8,000/month gross: 28% = $2,240 maximum.

Most lenders will approve you up to 43% debt-to-income ratio, but you'd feel the strain beyond 28%.

One More Thing: Closing Costs

Before you even make your first mortgage payment, you'll pay 2%–5% of the loan amount in closing costs. On a $315,000 loan, that's $6,300–$15,750 due at closing — in addition to your down payment. Many buyers are surprised by this. Budget for it.

Ready to see your real numbers? Use our Mortgage Calculator to calculate your exact monthly payment with taxes, insurance, and PMI.