Question

You have a mortgage of $93,000 at 5% for 20 years. The property taxes are $3,700 per year, and the hazard insurance premium is $686 per year. Find the monthly PITI payment.

Answer 1

To be calculated:

Monthly PITI (Principal, Interest, Taxes, Insurance) payment

Given values:

Principal amount, P = $93,000

Rate of interest, R = 5% per year = 5 / (100 x 12) = 0.0041666667 per month

Time period, N = 20 years = 240 months

Property taxes, T = $3,700 per year

Insurance premium, I = $686 per year

Solution:

The monthly PITI payment is calculated using the below formula;

PITI payment = (R * P) / [1 - (1 + R)^(-N)] + T/12 + I/12

where,

R = Monthly rate of interest

P = Principal amount

N = Total months of loan period

T = Annual tax amount

I = Annual insurance amount

Putting all the given values in the above formula, we get;

PITI payment = (r * P) / [1 - (1 + r)^(-N)] + T/12 + I/12

PITI payment = (0.0041666667 * 93000) / [1 - (1 + 0.0041666667)]^(-240) + 3700/12 + 686/12

PITI payment = (387.5) / [1 - (1.0041666667)^(-240)] + 308.3333 + 57.1667

PITI payment = (387.5) / (0.6313555) + 365.5

PITI payment = 613.75881 + 365.5

PITI payment = 979.25881 or 979.26

PITI payment = $979.26

Monthly PITI payment = $979.26