Principal, Interest, Tax, Insurance(PITI) Law and Legal Definition

Principal, interest, tax, and insurance are the components of a mortgage payment. PITI is the common term used to describe the above components. Money used to pay the balance is the principal. The fee charged for availing a loan service is known as interest. The property tax paid for a home/real estate is the tax. Private mortgage insurance and property insurance are covered under insurance. PITI is usually measured on a monthly basis. PITI is compared to a customer’s gross income for approving a loan. Banks always prefer a lower PITI or a PITI equal to a customer’s gross monthly income.