How much will a $500,000 mortgage cost you?

With U.S. home prices reaching record highs, buyers have had to plan their budgets carefully. Redfin reported that prices rose 4.1% in July 2024 compared to the same period last year. If you’re planning to take out a $500,000 mortgage, make sure you calculate the total costs beyond your interest rate and loan term. Property taxes, homeowners insurance, down payment, and interest rate can impact how much you’ll need to spend on a more-expensive home. 

Learn about how interest rates and terms change your payment amount, how to calculate your mortgage payment, and how to find the best rates for a $500,000 loan.

How much will a $500,000 mortgage cost you per month? 

Your monthly payment will vary depending on a few factors, such as the loan term you choose, the interest rate you receive, property taxes, and homeowners insurance.

The monthly payments below just reflect loan principal and interest. While it’s not complete, principal and interest represent a majority of your mortgage payment. 
 

If your loan has a fixed rate, your interest rate won’t change for the life of your loan. You’ll typically pay the same amount for principal and interest monthly for the life of the loan.

What factors influence your $500,000 mortgage payment? 

Besides your loan term and interest rate, other factors that affect your monthly mortgage payment include:

• Loan type: Certain loans have additional expenses that affect your mortgage payment. For example, FHA loans require you to pay a mortgage insurance premium, and conventional mortgages require private mortgage insurance for loans with down payments of less than 20%. 
• Property taxes: Your local government assesses your property’s home value, which in turn affects the amount you pay each month in property taxes. A portion of your taxes are collected each month with your mortgage payment
• Homeowners insurance: Most lenders will require you to have homeowners insurance. The amount you pay each month will depend on the policy you choose and whether you need additional coverage such as flood insurance. 

Amortization table on a $500,000 mortgage

Here’s a breakdown of the amortization schedule for a 30-year $500,000 mortgage with a 6% fixed rate mortgage using a mortgage calculator.

Here’s the amortization schedule on a $500,000 loan with a 6% interest rate, but with a 15-year term instead of a 30-year loan term:

Your loan term influences how much total interest you’ll pay. If you have a 6% fixed-rate mortgage for $500,000 and choose a 30-year term, you’ll pay $579,190.95 in interest. If you choose a 15-year term instead, the total interest paid will be $259,471.15. You can also use a mortgage calculator to see how different interest rates and term lengths compare.

How to calculate your $500,000 mortgage payment 

Your monthly payment is influenced by the type of home loan you choose. There are many types of home loans on the market, and a few have extra expenses that can affect how much you pay each month. Here are the costs associated with some of the most common loans:

• FHA: FHA loans have an additional expense known as a mortgage insurance premium (MIP). The upfront MIP cost is 1.75% of the base loan amount. There is also an annual MIP payment that depends on the loan amount, the loan-to-value ratio (LTV), and your loan term. For a 30-year loan with an LTV of less than 90%, you would pay 0.80% of the loan amount each year. Assuming $500,000 is your loan amount, you would pay $4,000 in MIP each year, which equals $333.33 a month. 
• USDA: USDA loans require a guarantee fee, which you pay once at closing (1% of the loan amount), and monthly thereafter. The annual fee is 0.35% of your loan balance. For a $500,000 loan, the annual fee for the first year would be $1,750, which would cost $145.83 a month.
• VA: VA loans have a funding fee, which you pay at closing, but they don’t have an annual expense that affects your monthly payment. The funding fee depends on whether you’ve used a VA loan before and the size of your down payment, and could range from 1.25% to 3.3% of the loan amount. For a $500,000 loan, this fee could fall between $6,250 and $16,500. 
• Conventional loan: Conventional loans require private mortgage insurance (PMI) when you make less than a 20% down payment. The Urban Institute found that homeowners paid 0.19% to 1.86% of the loan amount in PMI in 2023. On a $500,000 loan, this would cost between $79.17 to $775 a month. 

Can you afford a $500,000 mortgage? 

In addition to principal and interest, you’ll also want to budget for other expenses when determining how much you can afford. Consider these costs as well:

• Closing costs: These can be as high as 5% of a home’s purchase price. Closing costs are the fees you pay to complete a real estate purchase, such as origination fees, title search fees, or appraisal fees. 
• Upkeep: Homes need regular upkeep. The amount you should expect to spend on your home each year varies, but 1% to 4% of your home’s value is a good rule of thumb. For a $500,000 house, you should set aside around $5,000 each year for maintenance.
• Property taxes: If a home’s property taxes push the home to the maximum amount you’re comfortable spending each month, then you may want to lower your maximum purchase price. 
• Utilities: If it’s a large home, can you afford to heat and cool it? Don’t forget to factor in utility costs into your calculations. 
• Work: How long will it take you to get to work? If you’ll be driving long distances to and from each day, can you afford the extra costs of gas and car maintenance?
• Savings and retirement: Will a $500,000 mortgage allow you to continue to contribute to emergency savings and retirement each month? Putting aside money for retirement is important at every stage of your professional life.
• Travel and fun money: Make sure you still have room in your budget to eat out once in a while, update your wardrobe periodically, and travel and go on vacation. The allure of owning a nice house will quickly disappear if you don’t have room in your budget to do anything.

If a $500,000 house seems too expensive, consider a lower loan amount. The table below shows how much a homebuyer would need to earn to spend 28% on housing. The hypothetical monthly payments reflect principal and interest, not including property taxes, home insurance, or mortgage insurance. 

A loan officer will also give you a similar chart after you’ve completed the mortgage pre-approval process, so you can compare a wide range of purchase amounts, such as a $250,000 mortgage payment with a $350,000 one.

Tips for securing the best mortgage rates for a $500,000 loan 

Since principal and interest are the main components of your mortgage payment, getting a better interest rate will help you lower your overall cost. Here are a few steps to help get the best rates:

1. Improve your credit score: Your credit score affects your rate because it describes your credit history. The higher it is, the lower your rate will likely be. If your score could be better, you can improve it by making on-time payments and reducing your debt. You can also get a mortgage with bad credit if you want to buy a home sooner. 
2. Save up funds for a larger down payment: A higher down payment lowers your loan-to-value ratio, which should help you receive a better interest rate. 
3. Choose a shorter loan term: A shorter loan term will often get you a lower mortgage interest rate because it reduces the amount of uncertainty lenders have to deal with. As a result, they often offer lower rates for shorter loan terms. 
4. Stay with your current employer: Buyers who jump from one employer to the next are considered more of a lending risk. When you are in the midst of a mortgage application, try to stick with your current employer — or at least stay in the same industry — until you have closed. 

Payment on a $500,000 mortgage FAQ 

What is the monthly payment on a $500,000 mortgage?

The monthly payment on a $500,000 loan varies depending on your term, interest rate, property taxes, home insurance, and loan type. However, if you choose a 30-year loan and receive an interest rate of 6%, your monthly principal and interest payment would be $2,997.75 a month.

How much income do I need for a $500,000 mortgage?

The monthly payment on a $500,000 home starts at around $2,997.75, but if you add in home insurance and property taxes, the housing cost would be closer to $3,500 or more. This means you would need to have a gross annual income of $150,000, or a gross monthly income of $12,500 to afford a $500,000 mortgage.

Assuming the total mortgage payment is $4,000, then you would need a gross annual income of around $172,000.

How much is a down payment on a $500,000 house?

If you want to put down 20% to avoid paying PMI on a conventional loan, the down payment on a $500,000 home would be $100,000. If you make a 5% down payment, it would be $25,000. 

Can I afford a $500,000 house on a $100,000 salary?

Your monthly gross income on a $100,000 salary would be $8,333.33. If, for example, you take out a 30-year mortgage with a 6% interest rate, the principal and interest payment would be $2,997.75, meaning the monthly payment alone on a $500,000 mortgage would take up 36% of your gross income. 

To avoid stretching your finances too far, the maximum amount you should spend on housing each month on a $100,000 salary is $2,333.33. You can try to get your monthly mortgage payment closer to this range by looking for a lower interest rate, shopping for a less-expensive home, or making a larger down payment to reduce your loan amount.

Will mortgage rates drop in 2024?

Interest rates tumbled at the start of August, reaching their lowest level in over a year and settling around 6.5%. In minutes from the Federal Open Market Committee’s July meeting, the majority of policymakers felt it would be acceptable to lower rates at the next meeting in September. Experts say it’s likely that rates will continue to dip gradually through the end of the year, though it may take a while for homebuyers to see significant improvement to the housing market.