Most people pay close attention to what their monthly mortgage loan payment will be when they purchase a home. But home buyers often overlook that P & I (Principal and Interest) does not include T & I (Taxes and Insurance) … and the total due is the PITI.

First, regarding the P & I, one of the big comforts of a fixed rate mortgage is that one knows 15, 20, even 30 years in advance what the monthly payment of principal and interest will be. Because the interest rate does not change in a fixed rate mortgage (FRM), the monthly payment of P & I remains the same.

Of course, one danger of a variable rate mortgage (ARM, Interest Only) is that a borrower has no control over future monthly payments. Nor can one predict what one’s monthly P & I payment will be.

Most experts agree that those who have acquired an adjustable rate mortgage in recent times should expect their monthly payment to increase as interest rates rise in the future. Many recommend refinancing into a fixed rate mortgage while interest rates are as low as they are.

Whether one has a fixed rate mortage or an adjustable rate mortgage, the payment to the lender for the loan contains only two parts of the total amount due. The lender receives the Principal and Interest. But the Taxes and Insurance portions are required by government and insurance companies. (Many times these additional fees will be paid each month along with the Principal and Interest into an escrow account managed by your lender or the company that services your mortgage loan.)

Even those with a fixed rate mortgage will see their monthly payment increase as time passes because local governments increase property taxes and insurance companies increase insurance premiums.

With the destruction of homes during the recent hurricanes in the southeast straining the coffers of insurance companies, home buyers should also pay close attention to the cost of homeowners insurance. Insurance companies are in the business of staying in business. The losses experienced each year are reflected in increases in insurance premiums charged to homeowners.

What does this mean?

Simply this: Pay attention to all four letters in P, I, T & I. One can control the P & I with a fixed rate mortgage. But as the T & I increase the cost of owning a home increases as well.