What Is a P&I Payment on a Mortgage?
A “P&I” payment for a mortgage is a “principal and interest” payment, which is usually made monthly over the term of the loan, according to Quicken Loans. A principal and interest payment does not include taxes and insurance, two items that are commonly spread out over the loan in an escrow account. AllBusiness explains that the principal portion of the monthly payment reduces the amount of overall principal owed.
An example of a principal and interest payment includes a payment of $1,200 for an amortizing loan. The principal of the first monthly payment is $200, and the interest is $1,000 over a $10,000 loan. The outstanding balance of the loan is reduced to $9,800, according to AllBusiness.
Several loan companies, such as Ditech, offer online principal and interest calculators. Users input the overall loan amount, interest rate and term of the loan in months. The monthly payment is calculated and the interest paid during the term of the loan.
As of September 2014, two basic types of mortgage loans are available to Americans. A fixed-rate mortgage keeps the same interest rate for the entire loan regardless of how much bank interest rates change in that time period. Adjustable-rate mortgages typically have lower fixed rates during the first part of the loan that are followed by periods of adjustable rates later. These adjustable rates are good for people who may move in a few years or for someone who expects an increase of income, according to Wells Fargo.