The total mortgage cost and monthly payment for a $700K home

Quick insights

• The total cost of a $700,000 home depends on many factors, including personal finances, credit profile and loan details.
• Interest rates, down payments and repayment terms are primary factors in calculating monthly payments and total lifetime cost.
• Evaluating upfront costs, monthly payments and long-term expenses is pivotal for making an informed decision. Consult a mortgage professional for help.

Purchasing a home can be a celebration, but it’s also a major financial decision. Understanding the true cost of homeownership beyond just the purchase price is worthwhile. Your monthly mortgage payment and total loan cost will depend on factors like interest rates, loan terms and down payment size. In this article, we’ll break down the payment formula and costs involved to help you plan for a mortgage that fits your budget.

Calculate the monthly payment for a $700,000 home

Monthly mortgage payments depend on the interest rate, loan term and whether the loan has a fixed or adjustable rate.

M = P[ r(1+r)ⁿ ] / [ (1+r)ⁿ⁻¹ ]

• P represents the loan principal.
• r is the monthly interest rate (annual rate divided by 12).
• n is the number of payments (loan term in years times 12 months).

Examples (assuming 20% down):

• 30-year mortgage with a 6% fixed interest rate would result in a monthly principal and interest payment of approximately $3,360.
• 30-year mortgage with a 7% fixed interest rate would increase the payment to around $3,730.
• 15-year mortgage with 6% fixed interest would have a monthly payment of approximately $4,730.

The monthly payment formula can be useful for estimating costs of various loans. First-time homebuyers may want to consider a range of variable costs, moving and maintenance, to ensure the mortgage fits comfortably within their budget.

Variable costs to consider

Monthly payment estimates using the principal and interest formula don’t include property taxes, maintenance, homeowners insurance or private mortgage insurance (PMI), which typically increase the total monthly cost of buying a home. You might want to evaluate different loan options, insurance rates and local property taxes to determine total costs—a mortgage calculator can help. Planning in advance and keeping these key elements in mind can help with homebuying decisions.

What is the total cost of a mortgage on a $700,000 house?

The total cost of a $700,000 home depends on factors like the loan term, interest rate and down payment. Over the life of the loan, homeowners pay the principal amount and interest on it, which adds to the total cost. Here are some sample calculations if payments follow a typical schedule:

30-year fixed rate mortgage, assuming 20% down and 7% interest rate

• Lifetime cost over 30 years: $1,341,250
• Total interest paid: $781,250

15-year fixed rate mortgage, assuming 20% down and 7% interest rate

• Lifetime cost over 15 years: $906,020
• Total interest paid: $346,020

These are approximate figures; the actual amount may vary depending on the lender, property details and specific circumstances. The estimates also exclude property taxes, homeowners insurance and potential PMI, which are important variable costs. Consider speaking with a mortgage professional or using specific mortgage calculators to get a more accurate assessment of your situation.

Upfront costs on a $700k home

Before securing the mortgage for a $700,000 house, you can expect to pay upfront costs that go beyond the home’s purchase price. These expenses can add up quickly and should be factored into the overall budget to avoid surprises. Here are several worth noting:

• Down payment: Generally, the down payment is 3-20% of the home’s price, depending on the loan type and lender requirements. A higher down payment reduces monthly mortgage payments. A 20% down payment usually means PMI isn’t required on conventional loans.
• Closing costs: Closing costs can vary depending on the mortgage provider but usually cover lender fees, title insurance, appraisal and other administrative costs.
• Home inspection: Homebuyers should budget for a home inspection to assess the property’s condition and identify any potential issues before closing.
• Appraisal fee: Appraisals are required by loan providers to determine the home’s value and ensure it meets loan requirements.
• Property taxes and insurance escrow: Some loan providers may require several months’ worth of property taxes and homeowners insurance to be prepaid into an escrow account.

Income needed to afford a $700,000 house

The exact income you need to qualify for a  mortgage varies based on several financial factors. To approve a mortgage loan, lenders usually require a certain income, credit score and debt-to-income ratio (DTI) to confirm the borrower can manage the payments. Loan providers assess potential borrowers to decide if they can make mortgage payments long-term. Requirements can vary by lender, so consider comparing loan options and getting preapprovedtools_and_calculator_hl000066 to understand your qualifications.

What factors determine how much house you can afford?

The loan principal, term and interest rate are key factors in determining your monthly principal and interest payment. However, there are more factors that can influence how much home you can afford when applying for a mortgage. To get a clearer estimate of what fits within your budget, consider using a mortgage affordability calculator.tools_and_calculator_hl000066

Here are some important financial aspects in a mortgage application:

• DTI ratio: Loan providers evaluate your monthly debt payments relative to your gross income. A lower DTI increases borrowing power.
• Credit score: A higher credit score could potentially qualify you for lower interest rates, lowering monthly payments and increasing affordability.ec-crd-score-req
• Income and assets: Stable income and sufficient savings for a down payment and closing costs are crucial for mortgage approval.
• Existing monthly expenses: Beyond debts, loan providers consider regular expenses like utilities, childcare and transportation costs.
• Loan type and lender requirements: Different mortgage programs (like FHA, VA or conventional loans) have varying down payment and qualification requirements.

How to get a mortgage to buy a $700,000 home

Getting a mortgage involves multiple pertinent steps, from evaluating your finances to closing on your new home. Gaining clarity on the process can help you navigate loan options, improve your chances of approval and secure better loan terms. Here are some tips to help you get approved for a mortgage:

• Assess your finances: Review your income, credit score, DTI ratio and savings to help determine affordability. Lenders review a variety of factors—consult a professional for help assessing your situation.
• Compare loan programs: Consider options like conventional (strong credit, larger down payment), FHA (3.5% down, lower credit scores) or VA (no down payment for veterans).
• Get preapproved: A preapproval letter can strengthen your offer with verified financial documents.
• Save for a down payment: Aim for 20% down to avoid PMI on conventional loans, though lower options do exist for homebuyers.
• Shop for loan providers: Compare rates, terms, fees and customer service to find a great deal.
• Submit a mortgage application: Provide required documents like W-2s, tax returns and bank statements.
• Go through underwriting: Loan providers verify your finances and property value.
• Receive final approval and close: Sign paperwork and pay closing costs.

In summary

A $700,000 home purchase requires careful financial planning and consideration, as the impact of interest rates and loan terms can considerably affect your overall costs. Factors like income, down payment and interest rates play a major role in determining affordability and loan qualification.

Understanding the long-term costs of a mortgage is critical in making an informed decision that aligns with your financial goals. To make sure you’re on the right track, consult with a financial advisor or Home Lending Advisor.