PITI includes which components?

PITI includes which components?

• A. Principal, Interest, Taxes, and Insurance
• B. Principal, Interest, Taxes, Insurance, and Maintenance
• C. Base Rent Only
• D. Base Rent, Taxes, Insurance, and Maintenance

Answer: (A)

PITI represents the monthly payment that covers four parts of a mortgage: the loan’s principal, the interest on that loan, property taxes, and homeowners insurance. The principal is the portion that reduces the loan balance over time, while the interest is the lender’s charge for borrowing. Property taxes are the local taxes assessed on the property, and homeowners insurance protects the home from risks like fire or public liability. These two—taxes and insurance—are often collected in an escrow account by the lender so those bills are paid on time each month, which is why they’re included in the same payment as the loan costs. The other options mix in maintenance or rent, which aren’t part of the standard mortgage payment. Maintenance is an operating cost of owning and managing a property, and base rent is unrelated to the mortgage itself. So the four components are principal, interest, taxes, and insurance.

PITI represents the monthly payment that covers four parts of a mortgage: the loan’s principal, the interest on that loan, property taxes, and homeowners insurance. The principal is the portion that reduces the loan balance over time, while the interest is the lender’s charge for borrowing. Property taxes are the local taxes assessed on the property, and homeowners insurance protects the home from risks like fire or public liability. These two—taxes and insurance—are often collected in an escrow account by the lender so those bills are paid on time each month, which is why they’re included in the same payment as the loan costs. The other options mix in maintenance or rent, which aren’t part of the standard mortgage payment. Maintenance is an operating cost of owning and managing a property, and base rent is unrelated to the mortgage itself. So the four components are principal, interest, taxes, and insurance.