What Actually Goes Into a Mortgage Payment?

A Mortgage Tool Bus Guide for Colorado Homebuyers

— Think of It Like a Sushi Roll

🚌 Stop #1: Principal — The Part That's Actually Yours

Principal is the amount you borrowed to buy the home. Every payment you make chips away at this number. Early in the loan, a smaller share of your payment goes here — more goes to interest — but that shifts over time as the balance shrinks.

This is the only part of PITI that builds your equity directly.

🚌 Stop #2: Interest — The Cost of Borrowing

Interest is what the lender charges you for the loan. It's calculated on your remaining balance, so as your principal goes down, your interest cost goes down too. This is why an extra principal payment early in the loan saves you more over time than one made later.

Use the Monthly Payment Tool to see how principal and interest split out on your own numbers.

🚌 Stop #3: Taxes — Your Share of the County Budget

Property taxes fund local schools, roads, and services, and they're set at the county level. Colorado homeowners are fortunate here — the state's effective property tax rate is among the lowest in the country, generally landing around 0.4% to 0.5% of a home's value per year. In El Paso County, that typically works out to somewhere around $1,700 a year for a median-priced home, though it varies by ZIP code and school district.

Your lender usually collects 1/12th of your estimated annual tax bill with each monthly payment and holds it in escrow until the bill is due.

🚌 Stop #4: Insurance — Protecting the Investment

This covers two different things, and it trips people up:

• Homeowner's insurance protects the physical house — required by every lender, regardless of loan type.

• Mortgage insurance (PMI on conventional loans, MIP on FHA loans) protects the lender if you stop paying — not you. According to the Consumer Financial Protection Bureau, conventional loans with less than 20% down typically require PMI, which usually runs between roughly 0.5% and 1.5% of your loan amount per year depending on credit score and down payment. PMI can be removed once you reach 20% equity — it's not permanent.

FHA loans handle this differently — MIP is required regardless of down payment size. Compare loan types to see which structure fits your situation.

🚌 Stop #5: Putting the Roll Together

PITI is the whole roll — principal, interest, taxes, and insurance — wrapped into one monthly number. Lenders calculate it together because it's the real cost of owning the home, not just the loan itself. When someone tells you what they can "afford," this is the number that actually matters.

See the full loan options hub to compare how PITI looks across FHA, VA, USDA, and conventional loans.

HELPFUL TOOLS

• Monthly Payment Tool — see your own PITI breakdown

• FHA vs Conventional — compare insurance requirements

• Loan Options Hub — see all programs side by side

Frequently Asked Questions

Why did my mortgage payment go up even though my rate is fixed? 

A fixed interest rate only locks the principal and interest portion. Your taxes and insurance can still adjust — usually once a year — when your lender reviews your escrow account.

Is PMI the same thing as homeowner's insurance? 

No. Homeowner's insurance protects your home and is always required. PMI (or MIP on FHA loans) protects the lender if you default — it doesn't protect you or your property.

How much should I expect to pay in property taxes on a home in Colorado Springs? 

Colorado Springs sits in El Paso County, where effective property tax rates tend to land in the 0.4% range — well below the national average. On a median-priced home, that's often somewhere around $1,700 a year, though your exact bill depends on your specific neighborhood and school district.

Can I ever get rid of PMI? 

Yes — on a conventional loan, you can typically request PMI removal once you reach 20% equity, and it often cancels automatically at 22% equity. FHA mortgage insurance works differently and may last the life of the loan depending on your down payment.