Add 12% to PITI to Get Your Real Monthly Property Expense

Mortgage Principal, Mortgage Interest, Property Taxes and Homeowners Insurance (or other types of insurance), often referred to as PITI is the magic number quoted by realtors, mortgage brokers, and planning websites when assessing an individual’s ability to pay for a property.  


An example of PITI.

Let’s assume a house near a city with a purchase price of $500,000, 20% down payment ($100k), a 4% rate on a 30 year fixed rate mortgage, property tax rates of 1.25% of value, and yearly insurance of $1200.  Here’s what the expense breakdown of those items looks like on a monthly basis:

PITI Expense Breakdown Monthly Expense Annual Expense Notes
Mortgage Principal + Interest $1,909.66 $22915.92 First month interest: $1,333.33, principal: $576.33
Tax $520.83 $6249.96
Insurance $100.00 $1200.00
Total PITI $2530.49 $30365.88

There are many more costs associated with owning a property however that should be considered before making a purchase decision.  This post seeks to highlight some of the other baseline costs that when combined represent the total ‘real’ cost to the purchaser.  We’ll purposely leave out expenses that would be incurred to an individual no matter where they live, such as cable, heat, electricity.


Water and Sewer.

Whether the property is near a city and having municipal water and sewer, or in a more rural setting and having a water well and septic system, either one has costs associated.  

In the case of municipal water and sewer, the costs are paid to the municipality monthly.  For average consumption, water and sewer are typically in the range of $100/month for a single family home.

Water and Sewer Expense Breakdown Monthly Expense Annual Expense
Municipal Water and Sewer $100.00 $1200.00

In the case of a water well and septic system, the costs are based on less regular maintenance costs and usable life (assuming a 40 year usable life on a $40k replacement cost septic system)

Water Well and Septic Expense Breakdown Monthly Expense Annual Expense Notes
Water Well $20.00 $240.00 Pump and Electricity
Septic System $83.33 $1000.00 40 year usable life on $40k system replacement
Total Water Well and Septic Expense $103.33 $1240.00

In this example, we’ll assume a property near a city having municipal water and sewer.


Regular Upkeep and Maintenance.

In order to maintain the value of the property, it must be maintained and given general upkeep.  Not every property will incur every one of these expenses, and some might incur additional ones.  The expenses associated with each are assumptions based on averages seen in the northeast market where there are 4 seasons.

Expense Breakdown Monthly Expense Annual Expense Notes
Lawn supplies $10.00 $120.00 Fertilizer, seed, rakes, leaf bags
Lawnmower and snowblower annual maintenance $16.66 $200.00 $100 per machine per year
Plantings and other exterior decorations $10.00 $120.00 Flowers, mulch, potted plants
Casual labor for service calls $20.00 $240.00 Assume need a Plumber, Electrician, Carpenter, Painter once per year at a cost of $240
HVAC annual maintenance $20.00 $240.00 Assume cost of $240 for annual maintenance service call
Total Regular Upkeep and Maintenance $76.66 $919.92


Fixture replacement expenses.

Everything has a usable life and needs replacement at some point.  While the cost of replacing an item might not come for years in the future, it should be considered when budgeting so the homeowner doesn’t get caught off guard when the replacement becomes necessary.  Here are some common home fixtures, and the associated replacement costs that should be allocated on a monthly basis.  Conservative usable life assumptions and replacement costs are shared in the notes.

Fixture replacement expenses Monthly Expense Annual Expense Usable Life (years) Replacement Cost
Roof $27.78 $333.33 30 $10,000
Windows $27.78 $333.33 30 $10,000
Air Conditioning $12.50 $150.00 20 $3,000
Heating System $12.50 $150.00 20 $3,000
Hot Water Heater $8.33 $100.00 10 $1,000
Washer/Dryer $5.56 $66.67 15 $1,000
Refrigerator $5.56 $66.67 15 $1,000
Stove $5.56 $66.67 15 $1,000
Dishwasher $4.44 $53.33 15 $800
Lawnmower $8.33 $100.00 5 $500
Snowblower $8.33 $100.00 5 $500
Total fixture replacement expenses $126.67 $1520.00


The new real monthly expense.

Here’s what the monthly expenses looks like after adding water and sewer, regular upkeep and maintenance, and fixture replacement costs to PITI.

New Real Expense Breakdown Monthly Expense Annual Expense
PITI $2530.49 $30365.88
Water and Sewer $100.00 $1200.00
Regular Upkeep and Maintenance $76.66 $919.92
Fixture Replacement $126.67 $1520.00
New Real Expense $2833.82 $34005.84

After adding these additional expenses to PITI, we arrive at a new ‘real’ monthly expense of $2833.82.  Comparing this new expense total to our originally quoted PITI represents a ~12% increase.  To simplify your own calculations you might consider using the 12% on your own PITI number to see what your total ‘real’ monthly expense of home ownership is.  Over the years we’ve generally seen properties having between 10-15% depending on location, property type, and age of property.

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