PITI
Principal, Interest, Taxes, and Insurance — the four components of a monthly mortgage payment.
Definition
PITI stands for Principal, Interest, Taxes, and Insurance — the four components that make up a full monthly mortgage payment on a conventional loan with an escrow account. Lenders use PITI to calculate the full cost of carrying a mortgage when determining qualification ratios.
Principal: the portion of the payment that reduces the loan balance. Interest: the cost of borrowing (the largest portion early in the loan). Taxes: the property tax portion collected monthly into escrow. Insurance: homeowners insurance premium collected into escrow and paid annually by the lender.
For cash flow analysis, investors use PITI as the total monthly debt service on their loans. If property taxes or insurance are paid separately, you still must include them in your expense analysis — they're real costs whether or not they're escrowed.
Related Terms
Debt Service
The total cash required to cover loan payments — both principal and interest — over a given period.
Amortization
The process of paying off a loan through regular scheduled payments of principal and interest.
Cash Flow
The money left over each month after all property-related income and expenses are accounted for.
Mortgage
A loan used to purchase real property, secured by the property itself as collateral.
Escrow
A neutral third-party account that holds funds and documents during a real estate transaction.
Also in "P"
Points (Origination Points)
Upfront fees paid to a lender, equal to 1% of the loan amount per point.
Private Money
Loans from individual private investors — usually friends, family, or high-net-worth individuals — secured by real property.
Pro Forma
A financial projection document showing expected income, expenses, and returns for an investment property.