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How much is a mortgage on a $500,000 house?

Yahoo Personal Finance· Getty Images
E. Napoletano
·Contributor
6 min read

A cool half-million dollars might seem like a massive number, but here’s a fun fact: When it comes to home prices, it’s pretty average. As of April 2024, the average purchase price of a single-family home was $505,750, according to the U.S. Census Bureau. So, what does a $500,000 mortgage payment look like if you’re trying to budget for your first or next home?

The mortgage on a $500,000 house is $2,952 per month toward your mortgage principal and mortgage interest, assuming a 6.86% interest rate and a 30-year fixed term with 10% down. On a 15-year fixed-rate mortgage, your monthly principal and interest payment would be $3,836, assuming 10% down and a 6.16% mortgage interest rate.

However, the total cost of a $500,000 mortgage goes beyond your monthly P&I payment. Here’s a thorough breakdown of costs so you can build a better housing budget.

Learn more: What is a mortgage, and how does it work?

In this article:

Have a seat and grab a beverage — the cost of being “average” in the U.S. housing market could be tough to swallow. Here’s the total cost of principal and interest payments for a mortgage on a $500,000 house, broken down by two popular mortgage loan terms.

30-year fixed-rate mortgage

  • Lifetime cost over 30 years: $1,062,601.49

  • Total interest paid: $612,601.49

  • Assumes 10% down, 6.86% interest rate

15-year-fixed-rate mortgage

  • Lifetime cost over 15 years: $690,545.58

  • Total interest paid: $240,545.58

  • Assumes 10% down, 6.16% interest rate

As you can see, there’s quite a bit of cost savings with a 15-year mortgage. These mortgages tend to have lower interest rates than those with 30-year terms. The shorter loan term also means a speedier payoff, significantly reducing your total interest paid. You could save even more on interest if you qualify for VA or FHA loans, which can have lower interest rates.

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

Your monthly principal and interest payment on a $500,000 mortgage will depend on three main factors: mortgage type, interest rate, and term length. Here’s what your payment might look like each month based on three popular types of mortgages.

Our sample rates start at 7% for conventional mortgages, 6.5% for FHA mortgages, and 6% for VA mortgages — this is reflective of the fact that FHA rates are usually lower than conventional ones, and VA rates are typically the lowest of the three.

Note: The mortgage rates below are for illustrative purposes only and don’t indicate a rate you might receive if you apply for a home loan.

Use Yahoo Finance’s free mortgage calculator

Conventional mortgages are the most common type of mortgage and are available from a variety of lenders, including banks and credit unions.

The Federal Housing Administration insures FHA mortgages, which often have more lenient qualification criteria and lower down payment requirements than conventional loans.

VA mortgages, insured by the U.S. Department of Veterans Affairs, are available to those who qualify for a Certificate of Eligibility from the Department of Veterans Affairs.

Read more: What is a VA Certificate of Eligibility (COE), and how do you get one?

The costs of a mortgage on a $500,000 house go beyond your monthly principal and interest payment. Owning a home comes with various short- and long-term costs; knowing which costs are common can help you budget and ensure you’re buying a home you can afford.

You’ll run into short-term costs when you buy your home. These are typically known as closing costs — one-time expenses you’ll pay just before purchase or at closing — and generally run between 3% and 4% of your total loan amount. Some expected costs include:

The most common long-term costs you’ll encounter as a homeowner are your home maintenance expenses, property tax, and homeowners insurance. You also might have to pay for mortgage insurance or homeowners’ association dues.

Most mortgage payments include escrow payments, which are additional dollars added to your monthly bill that your lender sets aside to pay your property taxes and insurance. Your lender communicates directly with your insurance company and local tax assessor’s office to get accurate figures.

If you have an FHA or conventional mortgage and make a down payment that’s less than 20%, you may be required to pay private mortgage insurance (PMI). This insurance, generally ranging from $30 to $70 monthly for every $100,000 you borrow, protects the lender if you default on your loan. For a $500,000 mortgage, that would come to $150 to $350 per month. Once your loan balance reaches 80% of the home’s original value, you can usually stop paying this added cost.

Costs for maintenance can vary. General upkeep over time can include plumbing and appliance repairs, a new roof, and different renovations and upgrades to keep a home safe and cozy.

Dig deeper: What is mortgage insurance?

Whether you have a $500,000 or $5 million mortgage, all mortgages are amortized loans. When you make your monthly payments, those payments get split between the principal and interest. Most of your monthly mortgage payment will go toward interest since your outstanding principal is higher at the beginning of your mortgage term. Over time, however, more and more of your payment will go toward the principal.

Here’s a mortgage amortization schedule for a $500,000 15-year fixed-rate mortgage, assuming a 6.16% rate and 0% down payment, to show you how that works.

Learn more:

The minimum income for a $500,000 mortgage is roughly $103,500, assuming a 30-year fixed mortgage with a 6.86% rate and 10% down. This number also assumes you have no other debt. This results in a monthly principal and interest payment of $2,952. Most mortgage lenders want to ensure that a borrower’s monthly housing expenses don’t exceed 28% of gross income.

A 20% down payment on a $500,000 house is $100,000. You can make a lower down payment with a conventional mortgage, but you’ll be required to pay private mortgage insurance (PMI) until your loan balance is 80% of the home’s original value.

You can probably afford a $500,000 house if you make $200,000 annually. However, the mortgage you can afford will depend on your current monthly expenses, including any outstanding debt. Lenders want to ensure that a new mortgage won’t strain your finances and typically want your monthly housing expenses to be 28% or less of your gross monthly income.

This article was edited by Laura Grace Tarpley