Kovats Real Estate School Practice Test 2025 - Free Real Estate Practice Questions and Study Guide

The component of PITI that can fluctuate annually based on local tax assessments is taxes. Property taxes are determined by local government taxing authorities and can change from year to year due to various factors such as changes in property values, local budget requirements, and adjustments in tax rates. These adjustments can reflect new funding needs for public services like schools, infrastructure, and emergency services, leading to variations in the amount homeowners owe.

Principal and interest, on the other hand, remain consistent over the life of a fixed-rate mortgage, with the principal payment gradually increasing as the loan is paid down and interest remaining stable until the loan is refinanced or paid off. Insurance premiums might also change, but those changes are generally less predictable and usually depend on the insurance provider and policy considerations rather than local tax assessments. Therefore, taxes are the element in PITI that is directly influenced by local governmental budgetary decisions, leading to annual fluctuations.