Quick Answer
Your monthly mortgage payment usually equals PITI: principal + interest + property taxes + homeowners insurance. Add HOA/condo fees and, if applicable, PMI (US) or mortgage default insurance (Canada). Use the formula M = P·[r(1+r)^n]/[(1+r)^n–1] for principal & interest, then add monthly estimates for taxes/insurance/fees to get your total.
What is PITI? (Plus HOA/condo fees and PMI/CMHC)
PITI breaks down your total housing payment:
- Principal – Amount going toward loan balance
- Interest – Cost of borrowing
- Taxes – Property taxes (usually escrowed monthly)
- Insurance – Homeowners/hazard insurance
Additional costs often included:
- PMI (US) – Private mortgage insurance if down payment < 20%
- CMHC/Sagen/Canada Guaranty (Canada) – Mortgage default insurance
- HOA/Condo fees – Monthly association dues
The mortgage formula (principal & interest)
The standard mortgage payment formula:
Variables: loan amount (P), monthly rate (r), term in months (n)
- M = Monthly payment (principal + interest only)
- P = Principal loan amount
- r = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments (years × 12)
Worked example: $400,000 at 6.5% for 30 years
- P = $400,000
- r = 6.5% ÷ 12 = 0.0541667
- n = 30 × 12 = 360 payments
Result: M = $2,528 per month (principal + interest)
Estimating taxes & insurance (escrow vs. pay direct)
Most lenders require escrow for taxes and insurance:
- Property taxes – Typically 0.5–2.5% of home value annually
- Homeowners insurance – Usually $800–2,000+ annually
- Escrow cushion – Lenders hold 2-month buffer
Example: $400,000 home might add $400–600/month for taxes and insurance combined.
When PMI/CMHC applies and how to remove/reduce it
US (PMI):
- Required with <20% down payment
- Costs 0.3–1.5% of loan amount annually
- Automatically cancels at 78% loan-to-value
- Can request removal at 80% LTV with re-appraisal
Canada (CMHC/Sagen/Canada Guaranty):
- Required with <20% down payment
- One-time premium (2.8–4% of loan) usually added to mortgage
- Cannot be "removed" but refinancing at ≥20% equity avoids new insurance
Extras to budget: HOA/condo fees, utilities, maintenance (1–3%/yr)
Beyond PITI, budget for:
- HOA/condo fees – $100–500+ monthly
- Utilities – $150–300+ monthly
- Maintenance – 1–3% of home value annually
- Emergency repairs – Keep 3–6 months housing expenses saved
Quick calculator table (common loan sizes & rates)
| Loan Amount | 5.5% (30yr) | 6.0% (30yr) | 6.5% (30yr) | 7.0% (30yr) |
|---|---|---|---|---|
| $300,000 | $1,703 | $1,799 | $1,896 | $1,996 |
| $400,000 | $2,271 | $2,398 | $2,528 | $2,661 |
| $500,000 | $2,839 | $2,998 | $3,160 | $3,327 |
US vs. Canada notes (stress test; fixed terms vs amortization)
Canada-Specific
- Stress test at contract rate + 2% or 5.25% (whichever is higher)
- Fixed terms (1–5 years) vs. 25–30 year amortization
- Gross Debt Service (GDS) ≤32%, Total Debt Service (TDS) ≤40%
US-Specific
- Debt-to-income ratios typically ≤28% front-end, ≤36% back-end
- 30-year fixed rates more common than in Canada
- PMI costs and removal rules vary by loan type
Frequently Asked Questions
What's a good rule of thumb for taxes & insurance monthly?
Estimate 0.2–0.5% of home value monthly combined (varies significantly by location and home value).
How much should I budget for maintenance?
Plan for 1–3% of home value annually, or roughly $100–300 per month for a typical home.
When does PMI/CMHC drop off?
US: PMI auto-cancels at 78% LTV or by request at 80%. Canada: Insurance premium is paid upfront (no ongoing payments to cancel).
Should I escrow taxes/insurance or pay them myself?
Escrow ensures you won't miss payments but you lose interest on that money. Self-pay gives control but requires discipline.