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What is the monthly payment on a $400,000 mortgage?

Yahoo Personal Finance· Getty Images
6 min read

With home prices steadily rising over the years, you’ll want to be financially prepared if you’re searching for a new place to call home. According to new U.S. Census Bureau data, the median sales price of single-family homes sold in May 2024 was $417,400.

Let's look at how much you'd owe monthly if you took out a $400,000 home loan. This way, you’ll better understand how much home you can afford and whether becoming a homeowner makes financial sense for you right now.

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Your monthly payment on a $400,000 mortgage depends on several factors, including how long your loan term is and the mortgage interest rate you secure. Other costs like insurance and property taxes will also affect your monthly payments, but we’ll touch on that later.

The shorter your loan term, the higher your monthly mortgage payments will be because you have less time to repay the loan. For example, if you take out a $400,000 30-year mortgage with a 7% fixed interest rate, your monthly payment toward principal and interest would be around $2,661. But, if you shorten your loan term to 15 years, your monthly payments may increase to $3,595.

Another thing to note is that interest rates tend to be a bit lower on shorter-term mortgages. The example above is simply to help you understand how term lengths can affect your monthly mortgage rates. In a real-life scenario, you may see that the interest rate on a 30-year $400,000 loan is 7.25%, while the rate on a 15-year loan for the same amount is slightly lower at 6.75%. We’ll dive into how interest rates impact your payment below.

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

The higher the mortgage interest rate, the higher your monthly mortgage payment. For example, if you take out a $400,000 30-year mortgage at a 6% interest rate, you’ll have a monthly payment of $2,398. However, the same $400,000 30-year mortgage at a 7% interest rate will have a monthly payment of $2,661. Again, these numbers have not factored in the cost of insurance or property taxes.

Your mortgage rates are influenced by many factors, including your credit score, your down payment amount, the type of home loan, and overall mortgage rates in your area. Rates can also vary from lender to lender, so you’ll want to get quotes from at least three different mortgage lenders to find the best deal.

Learn more: Use Yahoo Finance’s mortgage payment calculator

The following table should help you understand how both your interest rate and mortgage term length affect your monthly payment on a $400,000 home loan. Again, note that these numbers do not include additional homeownership costs like property taxes and private mortgage insurance (PMI).

If you choose a fixed-rate mortgage, your monthly mortgage payments will typically stay the same throughout the life of your loan. However, at the beginning of your loan term, most of the money you pay will go toward the interest. As time goes on, the amount going toward the mortgage principal (the money you originally borrowed) will grow larger while the amount going toward interest declines.

Here’s a breakdown of a mortgage amortization schedule on a 30-year $400,000 mortgage with a 7% interest rate to help you understand what that looks like. (Each number is rounded to the nearest dollar.)

Besides your mortgage rate and loan term, the following costs could also affect your monthly mortgage payments on a $400,000 house.

Homeowners insurance is a financial protection policy that pays a lump sum if your home, property, personal belongings, and other assets in your house are damaged due to a covered peril, such as theft, vandalism, or fire. The average cost of homeowners insurance in the U.S. is $1,754 annually, or $146 a month, according to a 2023 Policygenius analysis of home insurance premiums in every U.S. state and ZIP code.

Property tax is an annual or semiannual tax levied by your local and state governments. It's based on the value of your property, which includes both the land and the buildings on it. Property tax rates vary by location, but the average property tax paid per household in the U.S. was $1,682 in 2021.

If you take out a conventional loan but put down less than 20%, you must pay private mortgage insurance. PMI can cost anywhere from $30 to $70 per month for every $100,000 you borrow, according to Freddie Mac. PMI protects the lender if you stop making payments on your loan.

If you take out an FHA loan, you must pay a mortgage insurance premium (MIP) regardless of your down payment amount. FHA mortgage insurance has two parts: an up-front payment at closing and an annual premium. The up-front MIP is 1.75% of the loan amount, or $7,000 on a $400,000 mortgage. The annual MIP varies based on the size, term, and loan-to-value (LTV) ratio.

Learn more: How FHA loans work

If you live in a home connected to a homeowners' association (HOA), you’ll also have to pay HOA dues to help the association maintain common areas and shared amenities within the community.

According to the National Association of Realtors? (NAR), the average monthly HOA fee in the U.S. is $259 — but it can vary dramatically across the country.

According to NAR, the average monthly mortgage payment in the U.S. was $2,039 as of December 2023. The study also found that the Western part of the country spent the highest percentage of their income on their mortgage payments at 34.5%, and the Midwest had the lowest at 18%.

The 28/36 rule, 35/45 rule, and 25% rule are three common formulas you can use to help you determine what percentage of your income should go toward your mortgage. To meet the 28/36 rule, no more than 28% of your gross monthly income should be spent on your monthly mortgage payment, and no more than 36% should go toward monthly debt payments. The 35/45 rule recommends keeping your total monthly debt, including your mortgage payment, under 35% of your pretax income and 45% of your post-tax income. The 25% rule is the strictest since your monthly housing payment must be 25% or less of your monthly take-home pay.

The household income for a $400,000 house depends on various factors. You might be able to comfortably afford monthly mortgage payments on a $400,000 house with a $90,000 annual salary — but this assumes a 6.5% interest rate, no down payment, and no other monthly debts. It also only factors in your mortgage principal and interest. You’ll probably need closer to a $105,000 salary once you factor in insurance and taxes, or even more if you have other monthly debt obligations.

This article was edited by Laura Grace Tarpley