Deciding on whether to take out a mortgage or not can be confusing enough, but figuring out how much you’ll pay per month can be even more complicated. Don’t let this number scare you away from buying your first home, though!
With the right information, you can determine how much your monthly payments will be and how much of your monthly income they’ll require so that you’re prepared when making the big decision to buy a home. This article will teach you everything you need to know about figuring out your mortgage payment!
The expected monthly payment on a $115,000 mortgage
The average monthly mortgage payment can range from around $1175 in California to over $1800 in New York. The median monthly mortgage payment is right at the national average of just under $1,400 per month. This works out to around $17,600 per year or $213 per day.
For this reason, it’s important for buyers to know how much they will be paying before making a purchase. Even if you plan on living in your home for less than ten years and are taking advantage of low interest rates by refinancing when your loan expires, there are more factors to consider such as property taxes and homeowner’s insurance.
The percentage of household income needed to make the payment
The median monthly mortgage in America is about $1,054 according to the American Association of Individual Investors. This equals out to about 29% of your household income if you’re earning a middle-class salary of about $54,390 per year.
However, as your house price increases so does the percentage you need to pay towards your monthly mortgage payment. For example, let’s say you are buying a house for around $115k and will make payments every month for 30 years until it is paid off.
Whether you can really afford this home
If you’re looking for your first home or an investment property, there are a lot of factors to consider. The price is obviously important, but also the size and cost of the mortgage each month. The down payment on your first home will vary depending on how much money you have saved up and the kind of financing options available in your area. If you qualify for a mortgage with no down payment at all or very low interest rates, that could significantly lower your monthly payments.
Taxes and insurance – do they get factored in?
This is a common question and can be difficult to answer. In fact, the monthly cost can vary drastically depending on where you live and what type of home you’re looking at buying. Homebuyers may find that they are qualified for lower monthly payments by choosing a less expensive house, or putting more money down.
On the other hand, buyers who choose a more expensive property may see their mortgage payment increase significantly over time. With so many factors to consider it’s important for prospective homeowners to get advice from financial experts about how much they will realistically be able to afford in terms of housing costs each month.
Household budget needed to make these payments
The mortgage payment for a home at the median price in this city would be about $4,411 per month. This is based on the assumption that no money will be put towards the principal at all over 30 years and that home prices appreciate by only 4% annually. It also assumes an interest rate of 3.5%. As you can see, it takes a considerable amount of income to afford such a large monthly mortgage payment.
How far will the down payment go towards closing costs and other expenses
Many buyers know that in addition to the 20% down payment, you need an additional 3% for closing costs and 10% for other fees. Closing costs will vary from region to region depending on your state or county but can generally be expected to be in the neighborhood of 2-4%. You will also have various escrow fees for your homeowner’s insurance, property taxes and mortgage interest.
Homeowners insurance is usually between 1-2% of the purchase price. The property tax rate varies by location but it is about 1% per year of your home value. Your mortgage interest is generally .25% annually so if you’re financing $115,000 at 4%, then your monthly bill would be about $3125 annually.
Why do some properties cost so much more than others?
To illustrate the per-month difference of a high-end property to a low-end property, imagine you’re buying an apartment in the Upper East Side for $1.7 million. On that same block and in that same neighborhood is another apartment for sale for $850,000 – more than two times cheaper!
That’s right: the lower price apartment will cost less per month over 30 years because it costs less to buy in total. The mortgage payments on that $850,000 home would be around $6,400 a month while the mortgage payments on that expensive Upper East Side pad would be around $12,800.
Final recommendations from your agent
So the best way to answer your question is how much it’s going to cost you. And that really depends on what sort of house you’re going to buy and how much money you have saved up for the down payment. My recommendation would be at least 20% as a down payment or around $25,000 in cash. The higher the percentage, the lower your monthly mortgage payments will be. I hope this helps!
How does interest rate affect affordability?
Your interest rate affects your monthly mortgage payment but the length of the loan does as well. When comparing the affordability of two loans that have different lengths to them it’s important to calculate how much interest you will pay over the course of that loan and use this figure to compare monthly payments.
This is because the longer your loan is, the more interest you will be paying on top of principal. So while it may seem like a $200k 30 year fixed-rate mortgage would cost less per month than a $200k 15 year fixed-rate mortgage ($1,533 vs. $2,366), in reality those numbers are closer ($1,530 vs.
What if I want 20% down instead of 10% (or less)?
Mortgage interest rates will be lower with a 20% down payment than a 10% down payment. With a 20% down payment and monthly payments of 115k per month, the mortgage balance would be reduced to 105k after 15 years of making your monthly payments. Monthly mortgage payments on the 105k balance would be around 8636 per month (see first table below).
That’s still significantly more expensive than living in an apartment, which is what I do now! Plus, my lease is up next year so I might not want to stay in this area. For these reasons I’m going to keep saving until I can afford a 20% down payment instead of buying now.