## Tuesday, June 23, 2009

### Predicting Your Monthly Payment (The PITI)

Your monthly payment (PITI) is the sum of four items - the principal on the loan (P), the interest on the loan (I), property taxes (T), and homeowner’s insurance (I). To predict your monthly payment for a 30-year fixed rate loan, use the following table to determine the principal and interest part of the payment. Simply divide the loan amount by 1,000 and then multiply that figure by the appropriate interest rate factor from the table below. To that sum, add 1/12th of the amount of your yearly taxes and 1/12th the amount of your yearly insurance premium; this will give you your PITI payment.

For example: If your mortgage loan amount was \$150,000 your monthly PITI would be:

\$150,000 divided by 1,000 equals 150. If your interest rate is 12% you would multiply 150 by 10.29, resulting in a value of \$1,542.50. Add your monthly insurance premium (approximately \$25-\$75 per month) and your property tax to your principal and interest and this is your monthly payment.

All property owners must pay general real estate taxes. These taxes are also called “ad valorem” taxes because the amount of the tax varies, according to the value of your property. General real estate is levied for the operation of various governmental agencies and municipalities. Other taxing bodies may include school districts, drainage, water, sanitary and recreation districts.

Each agency or municipality determines how much money is needed for the budget. They receive these funds through mills levied against properties in their counties. The state limits how much the mill levy can increase each year without voter approval. Each mill is equal to one-thousandth of one dollar (\$.001) of assessed value or \$1 for every \$1,000 of assessed value.

The actual tax is calculated by multiplying the assessed value by the current mill levy. General taxes are a lien against your home as of January 1st, the year of the tax, even though in Indiana they are not due until the following year.

Properties are valued or assessed by the county assessor. The land and buildings are usually assessed separately. The assessed value is approximately 12-15% of the true value (percentage value is determined by state law.) If an owner feels the assessed value of their property is incorrect, they can present their objection through the local taxing authority on an annual basis.