A mortgage payment is more than principal and interest. Property tax and home insurance are usually collected monthly too (escrow), so the number that actually leaves your account each month — often called PITI — is what you should budget around.
What's in the payment
Principal and interest are fixed for a fixed-rate loan and calculated on the amount you finance (home price minus down payment). Property tax and insurance are added on top and can drift over time as assessments and premiums change.
The amortization chart shows how your balance falls — slowly at first, because early payments are mostly interest, then faster as more goes to principal.
Down payment and term
A larger down payment lowers the financed amount and the monthly payment, and a 20% down payment typically avoids private mortgage insurance. A longer term lowers the monthly payment but raises total interest substantially — compare a 15- vs 30-year term to see the trade-off.
A worked example
Take a $350,000 home with $70,000 down (20%), financed at 6.5% over 30 years. You borrow $280,000, and the principal-and-interest portion is about $1,770 a month. Add roughly $350 for property tax and $125 for insurance and the real monthly cost — the PITI — is about $2,245.
Over the full 30 years, the interest alone comes to roughly $357,000 — more than the amount you borrowed. Shortening the term to 15 years would push the monthly payment up substantially but cut total interest by more than half, because the balance is repaid so much faster.
Costs buyers often forget
The mortgage payment is only part of owning a home. Budget for maintenance — a common rule of thumb is about 1% of the home's value per year — plus any HOA dues, and generally higher utility and repair costs than renting. Closing costs, typically 2–5% of the price, are due up front on top of the down payment.
Because taxes and insurance can rise over time, an escrow payment that fits today's budget may creep up in later years. It's worth leaving some headroom rather than stretching to the maximum a lender will approve.