Key takeout
A 30-year mortgage for a $1 million home costs between $6,700 and $8,200 a month over 30 years. You can pay more than $1 million in interest rate factors such as loan terms, interest rates, and down payments.
A while ago, a million dollars may have felt like a fortune. However, in today’s housing market, it is common to find a list of homes that fall within its seven-digit range, especially in high-cost cities such as Boston and San Francisco. But what does a $1 million home really cost when it comes to monthly mortgage payments? Let’s break it down.
What does the $1 million mortgage payment include?
Your mortgage payments aren’t just about paying off the loan. Typically included are:
Principal and Profit: The amount borrowed and interest charged by the lender’s private mortgage insurance (PMI): Required if you are investing property tax of less than 20%.
The amount you pay each month depends on the interest rate, type of loan, and the size of the down payment. The table below analyzes what the estimated mortgage payments for a $1 million household mortgage look like based on the amount of the advance payment.
Examples of monthly payments for a million dollar home
These estimates include the main components of mortgage payments: average additional costs such as taxes and insurance. As property taxes and insurance vary by location, actual monthly costs may vary.
30-year loan with 6.875% interest
Down payment loan amount Monthly payment (principal + interest) Estimated total payment (tax + insurance included) 20% ($200K) $800,000 $5,255 $6,697 10% ($100K) $900,000 $5,912 $7,917 5% ($50K) $950,000 $6,241 $8,2766
15-year loan with 5.99% interest
Down payment loan amount Monthly payment (principal + interest) Estimated total payment (tax + insurance included) 20% ($200k) $800,000 $6,747 $8,188 10% ($100K) $900,000 $7,590 $9,594 5% ($50K) $950,000 $8,012 $10,047
Note: Many lenders need to reduce at least 20% on jumbo loans, so 5% and 10% scenarios aren’t always available.
Need a more customized quote? Use Redfin’s mortgage calculator.
How do interest rates affect monthly mortgage payments?
Interest rates are one of the biggest factors that determine your monthly mortgage payments. A slight increase can significantly increase the amount you pay during the mortgage period.
For a $800,000 30-year loan:
Interest Monthly Payment (P&I) Total Interest Payed for Over 30 Years 6% $4,796 $926,560 6.5% $5,057 $1,020,520
While the 1% increase in interest may not seem to increase much on paper, it can cost tens of thousands of dollars of interest over the life of the loan. By improving your credit score and creating more down payments, you can get lower fees and reduce the total cost of buying a home.
How the type of loan changes monthly payments
There are multiple types of loans, each of which independently affects the monthly mortgage payments and the total interest paid over time. Here is a comparison of some of the typical loans when taking into account a 20% down payment.
Loan Type Monthly Payment (P&I) Pros Cons Cons is perfect for 30-year fixed mortgages. It’s easy to qualify for a higher total interest rate.
Slower Equity Builds
Buyers who want to spread payments over the long term 15-year fixed mortgage $6,747$6,747Monthly payments have a lower total interest. Buyers who can afford larger monthly payments and want to save on interest-adjustable interest rate mortgages (ARMs) can be difficult to qualify. Appropriate payments for short-term buyers can increase significantly after a certain period of time. Unpredictable long-term expenses Buyers plan to sell or refinance before charges are adjusted
How much should I throw away in a million dollar house?
The down payment affects the amount of your loan, your monthly payment, and determines whether you need a private mortgage insurance (PMI). A high down payment means less loans and lower interest costs, eliminating the PMI requirement if the down payment is at least 20%.
General down payment options
20% Down (200k $200k) – No PMI, Lower monthly payments, and 10% ($100K) with less interest paid over time – Need a PMI, Medium monthly payments 5% Down ($50K) – Need a PMI, Best monthly payments, and most interest
Some government-supported loans (FHA, VA, USDA) drop by just 0-3.5%, but due to low loan restrictions, they rarely apply to $1 million homes.
Income required for a $1 million home (30-year loan with 6.875% interest)
Before deciding on a home, it is important to understand how much you can afford based on your expenses and income. Lenders often suggest following the rules of 28/36 to get ideas for what is within reach. According to the rules, monthly housing expenses must not exceed 28% of total income, but total debt payments (such as loans and credit cards) remain below 36%.
Below is a breakdown of the income normally required to provide a $1 million home under the 28/36 rule.
Can you afford a $1 million home with a total affordable mortgage payment? $8,000 ($72K/year) ~ $2,240 $16,000 ($192K/year) ~ $4,480 $24,000 ($288K/year) ~ $6,720 Yes
Final Thoughts on Buying a Million Dollar House
Buying a $1 million home, especially in today’s interest rate environment, costs a considerable amount of money each month. The type of loan, down payment, and interest rate are the biggest factors in determining an affordable price.
To avoid PMI and ensure a better rate, we aim for a down payment of 20% if possible, and provide a competitive jumbo loan rate factor that provides a competitive jumbo loan rate factor when budgeting.
Redfin’s mortgage calculator allows you to provide a more personalized quote before you move around.
