What Is The Real Cost Of A Mortgage?

Understanding the true costs of your new mortgage is very important in getting a firm grasp of your financial future. Sometimes the information can be overwhelming but once you understand the basics, everything else will fall in place. The total cost of a mortgage is comprised of four main elements:

1. P - Principal
2. I - Interest
3. T - Taxes
4. I - Insurance

PITI is part of the formula that mortgage lenders use when calculating your affordability ratios. Many times home buyers ignore these additional costs when figuring how much of a home they can afford.

Principal
Principal represents the amount you borrow, which has to be repaid over time.

Interest
Interest is the cost that mortgage lenders charge for the use of their money during your repayment schedule.
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