Calculate the full monthly cost of owning a home — principal, interest, property tax, insurance, HOA, and PMI (PITI). See your true monthly payment, not just principal and interest.
Full monthly PITI cost
Your real monthly housing cost is far more than principal and interest. Lenders measure PITI — Principal, Interest, Taxes, and Insurance — plus HOA dues and PMI when applicable. Property taxes (often 1%–2% of home value per year) and homeowners insurance are usually collected monthly into an escrow account, and if your down payment is under 20% you'll also pay private mortgage insurance (PMI), typically 0.3%–1.5% of the loan per year.
For example, a $400,000 home with 20% down at 6.5% over 30 years has about $2,022 in P&I, plus $400/mo tax and $150/mo insurance — roughly $2,572/month all-in (no PMI at 20% down). Knowing the full PITI is essential for budgeting and for passing a lender's debt-to-income test, which is based on the total payment, not just P&I.
Principal and interest — the loan payment itself, set by loan amount, rate, and term.
Property tax and homeowners insurance, usually escrowed and paid monthly with your mortgage.
PMI applies with under 20% down and drops off at 20% equity. HOA dues apply in many condos and planned communities.
Property investment is screened with a small set of ratios before any detailed modelling. The 1% rule asks whether monthly rent reaches 1% of purchase price — a fast filter that fails in most expensive coastal markets and passes readily in the Midwest and South. The 50% rule assumes operating expenses consume half of gross rent, which is a remarkably durable approximation once vacancy, maintenance, management and capital reserves are all counted. Neither is a substitute for real numbers, but a property failing both is rarely worth underwriting in detail.
1% rule: Monthly rent ≥ Purchase price × 1%50% rule: Operating expenses ≈ Gross rent × 50%Estimated cash flow = (Rent × 50%) − Debt serviceGross rent multiplier = Price ÷ Annual gross rentwhere:
Assumptions: Rules of thumb for initial screening only. Actual expenses vary enormously with property age, condition, local tax rates and insurance — Florida and Texas insurance alone can break the 50% assumption.
Apply both rules of thumb, then estimate cash flow before detailed underwriting.
ResultFails the 1% rule (0.82%) — roughly −$247.08/month of cash flow
Negative cash flow is not automatically disqualifying — appreciation, principal paydown and depreciation shelter may still justify it — but it means the property costs money every month and depends entirely on price growth. The GRM here is $285,000 ÷ $28,200 = 10.1, which is toward the expensive end for a rental market.