PITI is the four-part monthly housing payment a lender adds up to qualify you for a mortgage: principal, interest, taxes, and insurance. The first two cover the loan itself, and the last two are the property costs your lender often collects alongside the loan and holds in escrow until the bills come due.
In practice
Say you buy a duplex for $340,000 with 25% down, so you finance $255,000 at 7% over 30 years. The principal-and-interest portion runs about $1,697 a month. Now add the two parts most new buyers forget: property taxes of roughly $4,200 a year ($350 a month) and a landlord insurance premium of $1,800 a year ($150 a month). Your PITI is $1,697 plus $350 plus $150, or $2,197 a month.
That gap matters. The principal and interest alone read like a $1,697 payment, but the number that actually leaves your account each month is $2,197. Underwrite the deal on PITI, never on the loan payment by itself.
Why it matters to a small landlord
PITI is the number that decides whether a property cash-flows. Subtract the full $2,197 from your collected rent, along with vacancy, repairs, and reserves, and what remains is your actual monthly result. It also shapes your bookkeeping: of that payment, only the interest and the property tax and insurance are deductible expenses, while the principal is a non-deductible paydown that builds your equity. If you lump the whole payment into one expense line, your mortgage interest tracking will overstate your deductions and your books will not tie out. For a cleaner read on how this flows into a deal, the NOI versus cash flow breakdown shows where the principal and escrow drop out.
A few neighbors are worth knowing. Amortization governs how the P and I inside PITI shift from mostly interest to mostly principal over the life of the loan. The T and I usually sit in an escrow account your servicer funds from each payment. And your down payment sets your loan-to-value, which in turn drives the interest rate baked into the I. Get those three straight and PITI stops being a surprise.