The amount of money you borrowed. Each month when you make your mortgage payment, you are paying back a small portion of principal. The longer you make payments, the more of your payment goes to reduce the principal you owe, over time, interest will become a smaller part of your monthly payment.

The cost of borrowing money, usually expressed as an annual percentage of the loan amount, for example 5 1/2%, 7% etc. Your lender will give you an “end of the year” summary showing the interest you paid. That interest is a straight deduction from your income prior to calculating the payment of your Federal taxes.

Taxes paid to local governments, usually charged as a percentage of the property value. Your lender collects the taxes through your monthly payments. The amount of tax will vary depending on where you live. Your real estate taxes are deductible on your Federal income tax return.

An insurance policy that protects you from any financial losses on your property that might result because of fire, flood or other “hazards.” Before you buy, compare companies and policies. Often, new construction has lower premiums. Initially, “safety” devices can also reduce the premium.

An insurance policy that helps mortgage lenders recover some of the losses incurred if a borrower fails to fully repay a loan. Mortgage insurance makes it possible to buy a home with a low down payment. This amount is reduced with higher down payment.

Lenders often refer to principal, interest, taxes and insurance as PITI. Generally, the PITI is the amount you will pay each month for your mortgage.

source: realtor.org