How much would a $900,000 mortgage cost per month?
Finding the right mortgage loan can be a laborious process, even in the best borrowing landscape. After all, there are lots of factors to consider, from your lender options to the type of mortgage loan you need, all of which can impact the cost of your loan. However, finding the right mortgage loan can be even more difficult in today's housing market, as the rates being offered on these loans are substantially higher than they were just a few years ago.
In 2020 and 2021, mortgage loans with rates of 3% (or lower) were the norm. These days, though, the average 30-year fixed-loan mortgage rate is 6.41% — over double what it was during the pandemic. And while the cooling inflationary environment and the expectation that the Fed will start cutting rates soon has led mortgage rates to decline over the past few weeks, today's rates still make it a lot more expensive than it once was to buy a home.
Given the higher costs of borrowing, it's important to understand what your monthly mortgage payments could look like if you're buying a home at home at today's rates. So what would the payments on a $900,000 mortgage loan be if you borrow money now — and what would they look like if you wait to buy until after the Fed slashes rates?
Wondering what mortgage rates you could qualify for now? Find out more here.
How much would a $900,000 mortgage cost per month?
The calculations below assume you are making a 20% down payment ($180,000) on the home. They do not include property taxes and homeowners insurance, which can be substantial for high-value properties and vary significantly depending on the location. With those factors in mind, here's what you can expect to pay monthly on a $900,000 loan at today's rates:
- 30-year mortgage at 6.41%: $4,508.36 per month
- 15-year mortgage at 5.78%: $5,990.53 per month
While the 15-year mortgage comes with a higher payment of about $1,482.17 more per month, it allows you to pay off the loan in half the time, potentially saving you hundreds of thousands of dollars in interest over the life of the loan.
But what if rates were to fall? Let's explore a scenario where rates decrease by 25 basis points, which is what the Fed's first rate cut is widely expected to be:
- 30-year mortgage at 6.16%: $4,391.11 per month
- 15-year mortgage at 5.53%: $5,894.47 per month
Now let's explore a scenario in which the Fed implements two 25-basis-point cuts in the coming months. While mortgage rates don't move in perfect sync with these broader economic changes, we can estimate the impact. If rates fall by 50 basis points to 5.91% and 5.28%, respectively, here's what a $900,000 mortgage loan would cost:
- 30-year mortgage at 5.91%: $4,275.19 per month
- 15-year mortgage at 5.28%: $5,799.28 per month
What this means is that waiting for rates to potentially drop further could save you about $233 per month on a 30-year mortgage or about $191 per month on a 15-year mortgage compared to the current rates. However, it's important to note that waiting for mortgage rates to drop further could be risky. If rates continue to fall, there's a good chance that even more buyers will enter the market. That, in turn, could increase the competition for available housing, which could make it more difficult (and more expensive) to buy a home.
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The bottom line
If you were to purchase a home at today's average rates with a $900,000 mortgage loan, you can expect the monthly payments (principal and interest only) to range from $4,508.36 to $5,990.53 (depending on the loan term you choose). And while waiting for rates to drop further could potentially save you a few hundred dollars per month, that may not be the best strategy to pursue. After all, the potential savings could be negated by the risks that come with a more competitive real estate market — and the missed opportunity for building significant equity. Ultimately, the decision should be based on your financial situation and your short- and long-term goals.
