What would my monthly mortgage payment be on a $500,000 home?
Whether it's a condo in the city, a single-family home in the suburbs or a cottage tucked away in the mountains sitting on an acre of land, having a space that you can truly call yours is a big accomplishment. It's also something that will have a significant impact on your finances, both when you buy the house and down the line.
Not only do you have to make a down payment when buying a home, but you also have to make monthly mortgage payments to pay off the cost of the home. And, knowing what your monthly mortgage payment will be before you start house-hunting will help you understand what you can afford and whether the payment will fit your payment into your household budget.
Let's look at what a monthly payment might look like for a $500,000 home.
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What would my monthly mortgage payment be on a $500,000 home?
Your monthly payment on a mortgage is decided based on a few factors: the amount you borrow, your interest rate and the term of your loan. We'll look at a few types of mortgages below to calculate the monthly payment if you buy a $500,000 house.
In these examples, we are assuming you put down 20% as a down payment, which comes to $100,000. This means you borrow $400,000 from your mortgage lender. Putting down 20% means you avoid paying for private mortgage insurance (PMI).
Example 1: 30-year fixed rate mortgage at 7.09%
As of December 26, 2023, the national average interest rate for a 30-year fixed-rate mortgage was 7.09%. Remember, though, that this is just the average. The interest rate you get will be based on myriad factors including your location and your credit history.
If you put down $100,000 as a 20% down payment and then borrow $400,000 with a 30-year fixed-rate mortgage with an interest rate of 7.09%, your monthly payment on the loan would be $2,685. That does not include your monthly property tax and homeowners insurance payments, which will vary based on your state and municipality.
You would pay a total of $567,135 in interest on this loan, for a total loan payment of $967,135. When you add in the $100,000 down payment, you would pay a total of $1,067,135 for the house.
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Example 2: 15-year fixed-rate mortgage at 6.42%
Another common type of mortgage is a 15-year fixed-rate mortgage. The average national rate for this mortgage type was 6.42% as of December 26, 2023.
If you put down $100,000 and borrow $400,000 with a 15-year mortgage at the current national average rate, you'd pay $3,466 per month on the loan. This does not include homeowners insurance or property taxes.
With these terms, you would pay $224,140 in interest throughout the loan. Your total payment on the loan would be $624,140. Add in your $100,000 down payment and it comes to a total of $724,140.
Example 3: Adjustable-rate mortgage
Another option is an adjustable-rate mortgage (ARM). With these types of loans, your mortgage rate will change during the loan based on the terms of the loan and the rates offered by your bank or mortgage lender. An adjustable rate loan will typically start with a period where the interest rate is set, and it will be adjusted periodically after that.
This is generally expressed with two numbers. For example, a 5/1 ARM has a five-year period in which the rate is set, and after that, the rate can change once per year.
With an ARM, you can only determine your monthly payment for the set rate period of the loan. After that, it will change based on the rate you get.
The bottom line
Your exact mortgage loan interest rate will depend on multiple factors, including your credit history and your location. Once you have a rate quote from a mortgage lender, you can determine how much you'll pay for a fixed-rate mortgage to see whether it will fit into your budget.
