What is PITI: Understanding and Saving on Your Mortgage

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PITI is a very important acronym if you’re a homeowner with a mortgage. It comprises four important factors in your monthly housing costs and stands for:Principal, Interest, Taxes and Insurance. We’ve broken down the jargon and will show you ways to save time or money at every step.

So What is PITI?

Principal

Your loan principal starts with the amount you originally borrowed for your home. With most types of mortgages (but not all), this amount decreases each time you make a payment based on how the loan is amortized. While you typically can’t lower your principal, you can usually pay it down more quickly than the schedule dictated by the lender. APP specializes in helping homeowners pay their loans off faster. Taking the example of a 30-year $200,000 mortgage at 4.25 percent, you’d pay off your loan off 53 months faster using our AutoPayPlus program. We’ll debit your account biweekly for half of your regular monthly mortgage payment, so by the end of a year you’ll have made one extra mortgage payment. It’s that simple and it’s that effective!

Interest

Loan providers have a number of options to make a profit when lending homeowners money to purchase a home, including closing fees, points, and the interest you pay to them over time. Using the same mortgage example as above, you’d save more than $25,000 in interest payments over the life of that 30-year loan at 4.25 percent by using AutoPayPlus’ biweekly loan program. Use our calculator and see just how much money you can save on your mortgage.

Another option is to refinance your loan, but be sure to check out the closing costs and any other fees associated with that option and make certain your interest rate will decrease enough to justify that added expense. APP’s one-time enrollment fee will allow you to not only save on your current mortgage, but on the next one, and the next one, and your car loan, and your student loan, and your credit cards, and even on some family members’ loans. We believe our one-time fee and small per-transaction charge can be a great deal compared to having to pay closing costs again and potentially resetting the clock on your mortgage. But if you do choose to refinance, remember that you can still use our AutoPayPlus program to pay your new mortgage down faster. Call us or visit our website for all the information on how it works.

Taxes

There are a number of ways to lower your tax bill. However, be advised that having your property reviewed carries a certain degree of risk, as the municipality could ultimately determine that your property is undervalued and your taxes should be higher.

  • When your new assessment arrives, make sure the formula is accurately applied and act within the appeal deadline.
  • Make sure you’re getting all the tax breaks your locality allows (e.g., senior citizen, veteran, etc.).
  • Check your tax assessor’s records to ascertain that your property is accurately described (square footage, number of bedrooms, etc.).
  • Compare official descriptions of similar houses in your neighborhood to see if yours is overtaxed.
  • If the market value of your home has fallen, consider making your case for a lowered assessment.

Insurance

Homeowners insurance can be a very wise (and often required) purchase to protect against certain risks that come with home ownership. However, there can also be significant costs. Be sure to weigh the risks along with the benefits when lowering coverage, but consider the following options as potential avenues for cost savings.

  • Ask your provider for a list of all the available special discounts to see if you qualify.
  • Look into increasing the deductible on your coverage.
  • If your policy has riders, review them to make sure the original situation still applies.
  • Once a year compare the cost of your coverage to offers from other insurance companies.
  • Keep an up-to-date inventory of your possessions; adjust your insurance accordingly.

Be informed and know your options when it comes to your mortgage. There are several ways to save, and you owe it to yourself to explore them all. The difference may be thousands of dollars and years of mortgage-free living.