Mortgage Explained
A clear guide to how mortgages work — payments, amortization, PMI, and what to budget beyond the monthly bill.
8 min read · Last updated: July 13, 2026
Mortgage basics
A mortgage is a loan secured by real estate. You borrow the purchase price minus your down payment, then repay over 15–30 years with interest. The lender holds a lien on the property until the loan is paid off.
What is PITI?
PITI stands for Principal, Interest, Taxes, and Insurance. Your monthly payment often includes all four. Principal reduces your loan balance; interest is the cost of borrowing. Property taxes and homeowners insurance are typically escrowed — collected monthly and paid by the lender on your behalf.
How amortization works
Early payments are mostly interest; later payments are mostly principal. On a 30-year loan, you might pay 70%+ of total interest in the first 10 years. Extra principal payments reduce total interest and shorten the loan term.
Private mortgage insurance (PMI)
If your down payment is less than 20%, lenders typically require PMI — insurance that protects the lender, not you. PMI adds $100–$300+ per month depending on loan size. It can often be removed once you reach 20% equity.
How much can you afford?
A common guideline is housing costs ≤ 28% of gross monthly income, and total debt ≤ 36%. Use the CalcVo Mortgage Calculator to model different price points, down payments, and rates before you shop.