The total mortgage cost and monthly payment for a $900K home

Quick insights

• The total cost of a $900,000 home depends on many factors, including personal finances, loan terms and variable expenses.
• The down payment, interest rate and loan term significantly affect the monthly mortgage payment calculation, but they’re not the only factors.
• Upfront costs and ongoing long-term expenses based on the property details are also important. Consult with a mortgage professional for help.

Purchasing a home is a big milestone worth celebrating, but it’s fundamental to understand the true cost of homeownership beyond just the purchase price. Your monthly mortgage payment and total loan cost will depend on factors like interest rate, loan term and down payment. In this article, we’ll break down that calculation, along with other expenses, to help you plan for a mortgage that fits your budget.

Calculate the monthly payment for a $900,000 home

The monthly payments depend mostly on interest rate, loan term (typically 15 or 30 years), and whether the loan has a fixed or adjustable rate. Here’s the formula for calculating monthly principal and interest portions of a mortgage payment:

M = P[ r(1+r)n ] / [ (1+r)n−1 ]

• P represents the loan principal: Typically the home’s purchase price minus the down payment.
• r is the monthly interest rate: Can be fixed or adjustable. 
• n is the number of payments: The loan term in years multiplied by 12 months—160 payments over 30 years, for example. 

Using this formula, you can estimate the monthly principal and interest payment on possible mortgages. Here are some approximate calculations assuming 20% down on a $900,000 home: 

• 30-year mortgage with a 6% fixed interest rate: $4,320
• 30-year mortgage with 7% fixed interest: $4,790
• 15-year mortgage with 7% fixed interest rate: $6,470

These estimates do not include property taxes, maintenance, homeowners insurance or private mortgage insurance (PMI), which all tend to increase the total monthly cost of buying a home. Specific mortgage calculators can refine your estimates. Planning in advance and keeping key elements in mind will help you make a smooth and rewarding homebuying decision.

What is the total cost of a mortgage on a $900,000 house?

The interest rate, loan term and down payment will greatly affect how much repaying a mortgage can cost. Here are a couple approximate calculations to illustrate how the loan term alone can affect the total costs: 

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

• Total cost over 30 years: $1,724,460
• Total interest paid: $1,004,460

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

• Total cost over 15 years: $1,164,880
• Total interest paid: $444,880

The total cost of owning a $900,000 home also depends on factors like the loan term, interest rate and down payment. Property taxes, homeowners insurance and PMI are also important variable costs. These can be long-term expenses that you pay monthly.

Upfront costs on a $900k house

Before securing a mortgage, 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. Some examples:

• 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 and may eliminate PMI 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 may want to 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. These could be due upfront and also built into your monthly mortgage payment after the purchase.
• PMI: If the down payment is less than 20% on a conventional loan, monthly premiums are normally required with your mortgage payment for a period. 

Income needed to afford a $900,000 house

The exact amount can vary depending on several financial factors. To qualify for a mortgage, loan providers usually require a certain income, credit score and debt-to-income ratio (DTI) to confirm the borrower can manage the payments. Loan providers generally want to determine if someone can make mortgage payments long-term. Requirements vary by lender, so consider comparing loan options and getting preapproved to understand your qualifications. 

To get a clearer estimate of what fits within your budget, consider using a mortgage affordability calculator.tools-and-calculator-hl000066

How to get a $900,000 house

Getting a mortgage involves multiple pertinent steps, from evaluating your finances to closing on your new home. Here are some important parts of the process: 

• Assess your finances: Review your income, DTI ratio and savings to determine affordability. 
• Get preapproved: A preapproval letter can strengthen your offer with verified financial documents. The document can also clarify how much a lender thinks you can afford.
• Shop for loan providers: Compare rates, fees and customer service, among other factors, to find terms that work for you.
• Submit a mortgage application: Provide required documents like W-2s, tax returns and bank statements. Documents required will vary by lender.
• Receive final approval and close: Sign paperwork and pay closing costs to get the keys to your new home.

In summary

The impact of the down payment, interest rate and loan term considerably affect the monthly mortgage payment on a $900,000 home. There are various key factors that can influence how much home you can afford when applying for a mortgage. Understanding the upfront and long-term variable costs of homeownership is also critical in making an informed decision that aligns with your financial goals. To make sure you’re on the right track, consider consulting with a financial advisor or Home Lending Advisor.