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What is the monthly payment on a $600,000 mortgage?

Yahoo Personal Finance· Getty Images
9 min read

If you’re shopping for a new home and leaning toward houses that cost over $600,000, you may wonder if you can afford a $600,000 mortgage.

We’ll break down how much a $600,000 mortgage will cost you monthly and over the life of the loan. We’ll also share advice from mortgage experts on how to know whether a $600,000 mortgage is right for your financial situation and goals. That way, you can feel good about your housing debt on closing day and for years to come.

Learn more: How much house can you afford? Use the Yahoo Finance home affordability calculator.

In this article:

Many factors influence your mortgage cost besides the home price, including the following:

  • Down payment. The larger your down payment, the less you’ll have to borrow, resulting in a smaller mortgage and lower monthly payments. You may also receive a lower interest rate when you make a sizeable down payment.

  • Term length. A longer loan term results in a lower monthly payment for the duration of the debt but more interest paid overall. The reverse is true for a shorter loan term — your monthly payments will be higher because you’re paying off $600,000 in less time.

  • Interest rate. A higher interest rate will increase your monthly mortgage payment and overall borrowing costs, while the reverse is true for a lower interest rate.

  • Type of mortgage loan. A fixed-rate mortgage features a stable monthly payment toward the principal and interest for the life of the loan, but an adjustable-rate mortgage payment may increase or decrease during the loan term.

  • Location. Some areas have higher property taxes or homeowners insurance premiums, which can increase your mortgage payment if you escrow those expenses. Interest rates may vary by location too.

  • Closing costs. You’ll have to shell out a significant sum to finalize your home loan, whether that’s on closing day or spread out over the mortgage term. If you roll the closing costs into your loan, you’ll end up paying interest on those dollars and may charged a higher interest rate by your lender. Closing costs typically cost 2% to 5% of your loan, or $12,000 to $30,000 on a $600,000 mortgage.

Now, we’ll crunch some numbers to see how much your monthly mortgage payment will be.

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As mentioned above, your monthly payment heavily depends on your term length and mortgage interest rate. Here’s how those two factors can impact your monthly payments on a $600,000 mortgage.

Note: For simplicity's sake, we chose to stick with fixed-rate mortgages, and the above figures exclude property taxes, homeowners insurance, homeowners’ association fees, mortgage insurance, and other expenses you may incur.

As you can see, opting for a 15-year mortgage over a 30-year one results in a much higher monthly payment. However, doing so can help you pay significantly less interest overall. We’ll share some figures demonstrating this in a moment.

(It’s also worth noting that shorter terms usually have lower interest rates, but we kept the rates the same in the table to keep the example simple.)

Learn more: Use the free Yahoo Finance mortgage payment calculator

When you take out a mortgage, you’ll receive an amortization schedule, a chart showing how much of each monthly payment goes toward principal versus interest. Your amortization schedule also reveals how much interest you’ll pay on your loan if you hold it until the end of the term.

Looking at this chart initially can be disheartening because most of your mortgage payment will go toward interest at the start of your loan term. However, the balance will eventually shift, and more and more of your money will go toward paying off the mortgage principal balance as the term progresses.

Let’s look at two example amortization schedules — one for a 30-year loan and one for a 15-year loan. In both cases, you’re financing $600,000 at 7% interest beginning in January 2024. For brevity, we’ve listed the figures by year instead of month.

Dig deeper: 5 strategies to get the lowest mortgage rates

With this loan, your monthly payment will be $3,992. Assuming you keep the loan for the entire term, you’ll ultimately pay more than $837,000 in interest, bringing your total mortgage cost to more than $1.4 million.

With this mortgage, you’ll pay $5,393 monthly. If you keep the loan for the entire 15 years, you’ll pay more than $370,000 in interest, bringing your total mortgage cost to over $970,000. As you can see, taking out a 15-year mortgage can save you a fortune in interest payments, but it may be more challenging to incorporate into your budget.

Now that you’ve seen how a 30-year mortgage and a 15-year mortgage stack up against each other in terms of cost, you may be trying to decide which is best for you. We spoke to multiple mortgage experts, and their opinions are mixed.

For instance, Kevin Leibowitz, founder of Grayton Mortgage, believes the longer term is usually the better option. “I'm a big proponent of a 30-year vs. a 15-year — especially in the current market. The 15-year rates aren't that much lower, and the payment is much higher ... For most new home buyers, the additional required payment for a 15-year mortgage is too high,” said Leibowitz via email.

Mark Worthington, branch manager at Churchill Mortgage, understands the affordability aspect of a 30-year mortgage. However, he said via email, “...My recommendation is always to take a 15-year mortgage if you can. Yes, for the same loan amount, your payment will be higher. You will also gain equity through principal reduction much quicker.”

Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, thinks you can have the best of both worlds by being strategic and intentional. If you take out the 30-year mortgage to give your budget some breathing room, you can make extra payments as your situation allows.

“In fact, just one extra mortgage payment a year can take five years off the life of a loan! That way, worst case, if you find yourself in a financial bind, you can always just make the minimum principal and interest payments. You can create any loan term you want by finessing how much you contribute each month,” said Alvarez via email.

Dig deeper: 15-year vs. 30-year mortgage — How to decide which is better

The experts weighed in on what your finances should look like if you want to take out a $600,000 mortgage. Here are their recommendations, broken down into separate criteria.

“The better your credit, the better your [interest] rate and the loan programs that are available to you will be,” said Alvarez. To that end, Leibowitz suggests getting your score up to at least 700 before applying for your home loan.

Read more: The credit score needed to buy a house

Your debt-to-income ratio (DTI) is how much you owe creditors compared to how much you earn each month, expressed as a percentage. A lower percentage indicates that you have sufficient income to repay your debts, while a higher percentage may predict cash flow problems. Mortgage lenders have rules for what percentage they will accept.

“For many lenders, you can go up to a maximum of 50% debt-to-income ratio with a conforming loan amount,” said Alvarez. This includes your mortgage and any other monthly debt payments, such as minimum credit card payments, student loans, or car loans.

Worthington takes a slightly more conservative approach here. “I recommend that no more than 43% of [a borrower’s] gross income be allotted to mortgage and other debt servicing. For instance, let's assume an estimated mortgage payment with taxes and insurance of $4,491 on a 30-year mortgage. If your house payment is your only bill, you will need an income of $10,441 per month,” said Worthington.

“If, however, you have a car payment of $650 and credit card payments of $250, you will need an income of $12,537. As you can see, your debt structure has a large influence on your income needed,” explained Worthington.

Dig deeper: What percentage of your income should go to a mortgage?

“Lenders will want to see that you have enough money for the down payment, closing costs, and post-closing reserves in your account. Post-closing reserves are typically six months of the total mortgage and additional carrying costs for the property,” said Alvarez.

“Many people want to know the maximum loan amount they can qualify for. I provide the advice I would give to a friend: Make sure you are leaving yourself with a comfortable cushion in case anything unexpected happens. From a real-world perspective, maxing out one's income and stretching liquid assets too thin can leave one in a precarious position when the unexpected happens,” Alvarez explained.

Worthington advises you to have cash on hand for more than just your housing expenses. “My personal recommendation for reserves is to have six months of your basic bills in savings or retirement funds somewhere. The funny thing is, most loan programs don't have a requirement for reserves of six months. I just find it to be a safe number if life hits you with a few twists and turns,” Worthington said.

Remember: You’ll encounter many costs associated with homeownership outside of your mortgage, such as utility bills and maintenance expenses. It's wise to give yourself an extra cash cushion to cover these inevitable outlays.

You may be able to afford a $600,000 mortgage if you have a stable job, your monthly housing payments make up 28% or less of your gross income, and your overall DTI ratio is under 45%, said Chuck Meier, senior vice president and mortgage sales director at Sunrise Banks. However, if you tend to spend a lot of your disposable income, you may be in over your head because DTI ratios don’t account for that habit.

The monthly payment for a $600,000 mortgage will depend on your loan term, interest rate, and other factors. At 7% interest, you can expect to pay nearly $4,000 monthly for a 30-year mortgage and roughly $5,400 for a 15-year mortgage (excluding property taxes, homeowners insurance, and other costs).

The amount of interest you’ll pay on a $600,000 mortgage will depend on your rate, loan term, and how long you stay in the house. For example, if you keep a 30-year mortgage at 7% interest for the entire loan term, you’ll end up paying more than $837,000 in interest. With a 15-year term, you’ll pay more than $370,000 in interest.

This article was edited by Laura Grace Tarpley