How much is the average mortgage payment?
Quick insights
- Recent reporting shows median mortgage payments have risen significantly over the past several years; your payment will vary based on price, down payment, rate, taxes, insurance and HOA.
- Your monthly mortgage payment will depend on several key factors such as the purchase price of your home, down payment, loan amount, mortgage interest rate, property taxes and homeowners insurance.
- Reducing your loan amount with a larger down payment or qualifying for a lower interest rate can help lower your monthly mortgage payment.
Before you start crunching the numbers for a brand-new home, it helps to know what a typical mortgage payment actually looks like. That monthly figure isn’t random; it’s shaped by your mortgage interest rate, down payment and the financial details unique to your situation.
To determine your monthly costs, you’ll also need to look at the interest rate you can secure, how much of a down payment you can afford and other variables specific to your finances and taxes in your area.
What is the average monthly mortgage payment in the U.S.?
According to Yahoo Finance, the median monthly mortgage payment in the U.S. has climbed to $2,134, up from $1,525 five years earlier as mortgage rates on 30-year fixed loans roughly doubled. Keep in mind that your actual monthly payment may vary depending on key factors such as the purchase price of your home, down payment amount, loan term, mortgage interest rate, property taxes, homeowners insurance and HOA fees (if applicable).
Factors that influence the average monthly mortgage payment
Your monthly mortgage payment usually comprises four key elements: principal, interest, taxes and insurance (or PITI).
- Principal: This is the amount you pay toward the balance of your mortgage loan.
- Interest: Interest is what you pay a lender to take out a mortgage loan, often expressed as a percentage.
- Taxes: Property taxes are based on the value of your home and determined by your local government.
- Insurance: These monthly payments cover homeowners and mortgage insurance—the latter of which you may pay if your down payment was less than 20%.
To calculate these factors, you’ll determine each that applies to your loan and then add them together.
Principal and interest payment
Assuming you have a fixed-rate mortgage, your principal and interest payments are determined using the following formula:
- P: Principal loan amount or the starting balance of your loan.
- R: The monthly interest rate is your annual mortgage interest rate divided by 12. It will be based on several factors, including your credit score.
- N: The number of payments, usually the number of years of your mortgage times 12. So a 30-year fixed-rate mortgage has 360 total payments, and a 15-year fixed-rate mortgage has 180 payments.
You would then apply the following formula:
P x (R (1+R)N / (1 + R)N - 1)
Let’s say you borrow $350,000 with a 30-year fixed-rate mortgage at an annual interest rate of 6.5%.
- P (principal loan amount): $350,000
- R (monthly interest rate): 6.5% / 12 = 0.5417% or 0.005417
- N (number of monthly payments): 30 x 12 = 360
350,000 [(0.005417 x (1 / 0.00517)^360) / ((1 + 0.005417)^360 -1)]
Approximately $2,212 per month for principal and interest only. This amount does not include property taxes, homeowners insurance, mortgage insurance (if applicable) or HOA fees, which would increase your total monthly mortgage payment.
You can also use the PMT function in your favorite spreadsheet software or a mortgage calculator.
While the monthly payments for a 15-year fixed-rate mortgage are higher than those for a 30-year mortgage, the shorter term will cost borrowers less in interest over the life of the loan.
If you have an adjustable-rate mortgage, your monthly payment would stay the same during the introductory period, but afterward, it would adjust periodically based on the terms of your mortgage.
Property taxes
After you pay your principal and interest, you’ll need to pay your property taxes. These taxes help pay for community services such as fire stations, police departments, sanitation, schools, libraries, public parks and more.
Property taxes are calculated annually and determined by your state and local tax authorities. Property taxes vary widely by location and can change over time. Assuming you pay your mortgage using an escrow account, this value is divided into monthly payments.
Insurance
One of the final components of your monthly mortgage payment is your insurance. It usually includes homeowners insurance. It may also include mortgage insurance.
Average monthly homeowners insurance
The amount you pay for homeowners insurance depends on where you live, the size of your home, age and overall condition, the amount of coverage you choose and your claims history. Most standard homeowners insurance policies cover damage from events like fire, wind, hail and theft. Additional coverage may be needed for risks such as floods or earthquakes, depending on where you live. If your property is located in a high-risk flood area, you may also need to purchase separate flood insurance, which would increase your monthly housing costs.
Average monthly private mortgage insurance
If you were unable to make a 20% down payment when you bought your home, you will most likely be required to pay private mortgage insurance (PMI). This is added to your monthly mortgage payment and continues until your loan-to-value (LTV) ratio reaches 80% or lower.
To estimate PMI, you can multiply your loan amount by your PMI rate to calculate an annual cost, then divide by 12 to determine the monthly amount. PMI rates can range from 0.3% and 1.5% of your total loan amount annually, but it truly depends on your credit score, loan type and down payment size.
Average monthly mortgage insurance premium
If you use a Federal Housing Administration (FHA) loan, you will usually pay for mortgage insurance in two parts: First, there’s an upfront mortgage insurance premium (MIP), which is a one-time cost you pay when you close on the home or roll into your loan balance. Second, there’s an annual MIP, which is split into monthly payments and added to your mortgage bill each month. How long you pay for the annual MIP is based on your loan terms and how much you put down. In some cases, it lasts 11 years. If your down payment is lower, it may stay on your loan for the entire time you have the mortgage.
Homeowners association fees
While not always part of your monthly mortgage payment, some communities have a homeowners association (HOA) that charges a monthly fee. These fees may cover maintenance of shared areas, security and access to community amenities. The fees will vary depending on the community and what it offers, so it’s a good idea to know what they will be before you buy.
In summary
Every home is different, but if you want to determine how much your average monthly payment will be, you can add up all the factors that can influence your payment. Knowing how to calculate your payment can help you narrow down how much home you can afford.
If you’re ready to begin the homebuying journey, start with a mortgage preapproval.
