A conventional 30-year mortgage on a $500,000 house, assuming good credit and current interest rates, would be around $3,000 per month, depending on property tax rates and homeowners insurance.
The median sales price for U.S. homes has been hovering around $500,000 since 2022, according to the U.S. Census Bureau, meaning most prospective homeowners should look to secure a mortgage for roughly that amount. That begs the question: how much is a mortgage on a $500,000 house? Well, it depends on the home loan you take out, your down payment, your credit score and more.
There are other factors besides the mortgage interest rate and principal balance that impact the mortgage payments on a $500,000 house. Here, we’ll breakdown the anticipated costs and provide expert tips on how you could lower your monthly payments.
How Much is a Mortgage on a $500,000 House?
The mortgage on a $500,000 house changes depending on interest rates and the loan term. For example, a 30-year mortgage with a 6.6% interest rate (the national average as of this writing) will cost around $1.3 million throughout the loan’s lifetime, assuming a 10% down payment. A 15-year mortgage with the same down payment and a 5.99% interest rate would cost around $667,000.
Monthly payments on the 30-year mortgage would be just under $3,000, not including things like taxes, home insurance, Private Mortgage Insurance (PMI) and HOA fees. For a 15-year fixed mortgage, you’d pay under $3,800 in principal and interest.
Interest payments will likely be the biggest factor in determining monthly mortgage payments. Jose Garcia, president and CEO of Northwest Community Credit Union, says buyers can secure better loan terms by making a larger down payment.
“Generally, the minimum down payment for a conventional loan can be as low as 3%, which would be $15,000 for a $500,000 house,” he says. “However, putting down 20% ($100,000) is often recommended to avoid private mortgage insurance (PMI) and to secure better loan terms.”
Similarly, a credit score of 700 or higher can help you secure a lower interest rate.
RELATED: What Percentage of Income Should Go to Mortgage
Adjustable-Rate Mortgage
An adjustable-rate mortgage (ARM) often comes with a set number of years of paying the same rate. The first number indicates the set number of years to start, and the second number indicates how often the rate will adjust. For example, a 5/1 ARM has a five-year period where you’ll pay the same interest rate, and then it will adjust every year. A 5/5 ARM has a set five-year period with one interest rate and then your rates can change every five years.
These loans often have an interest rate cap in which you can’t pay more than that amount. Additionally, the margin is fixed for the life of the loan. The margin sets the percentage points added to the index to find your interest rates based on current rates when your rate adjusts.
This loan type can be good if you only plan to be in the home for a short time, which helps you pay down the loan in those early years. It’s also good for loans where you’re comfortable paying the closing costs to refinance at the end of the introductory rates. You might also find an ARM helpful when you have more disposable income to put toward paying the mortgage down during the introductory period to close out your loan before it adjusts annually or even every six months.
How Much Is the Down Payment for a $500,000 House?
The down payment for a $500,000 house will be 3-20%, depending on your loan type. That means you’ll need $15,000 to $100,000 on hand to purchase the home. Here’s a look at various loan types and the down payment you’ll need.
Conventional Loans
Conventional loans often require a 20% down payment, but you might find lenders willing to provide the loan with as little as 3% down. Just know that you’ll be paying PMI until you’ve paid down 20% of the home’s value.
Check out our recommendations for the best online mortgage lenders.
Conforming Loans
With a conforming loan, you’ll work with a lender following Fannie Mae and Freddie Mac guidelines. You must put 3-20% down to purchase your home. That translates to $15,000-$100,000 for a $500,000 home. If you put down less than 20%, you’ll be paying PMI.
FHA Loans
An FHA loan is a loan that the federal government backs. You can purchase a home with as little as 3.5% down. For a $500,000 home, that is $17,500. These loans offer more flexible underwriting to help new buyers purchase homes. Still, because you’re putting so little down, you can also expect larger mortgage insurance premiums to increase your monthly payment.
USDA Loan
These home loans have maximums that are far lower than other loans. For example, in Ohio, the maximum loan limit is $417,000, meaning you’d have to put $83,000 down. The locations where you can purchase a home with a USDA loan will also vary. These loans are only available to low- and middle-income buyers. The home must be located in a rural area to qualify. However, you can get a USDA loan without money down if you meet the eligibility criteria and purchase an eligible home.
VA Loans
Veterans, active-duty military members or their surviving spouses can qualify for a VA loan. These loans allow you to purchase a home with no money down. However, you’ll borrow more and have higher monthly payments.
Bottom Line
If you’re in the market for a $500,000 house, review the rates and terms available on various loan types and sizes. Evaluate how much you can put down to make the monthly payment more affordable. Also, consider property tax rates in your home shopping area to factor that into the monthly payment. Avoid overstretching yourself financially, ensuring you can afford to maintain the home if unexpected expenses arise.
Why You Should Trust Us
Benzinga has provided investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who has won awards for his coverage of the New York City economy. He has navigated tricky real estate markets in New York, Northern Virginia and North Carolina.
For this story, we worked with Jose Garcia, president and CEO of Northwest Community Credit Union.
Frequently Asked Questions
How much income do I need for a 500k mortgage?
Most financial experts agree that you should spend no more than 28% of your gross monthly income on housing expenses. If you want to follow that rule, you’d need to earn about $120,000 per year to afford a $500,000 mortgage on a 30-year term.
What is the monthly payment on a 500k mortgage?
The monthly payment on a $500,000 mortgage depends on the loan type and interest rate. Assuming 10% down and the average interest rate as of this writing, a 30-year mortgage would have monthly payments of around $3,000. A 15-year mortgage with the same down payment and average interest rates would be around $3,800 per month, not including taxes, HOA fees, and other monthly dues.
What is the 28/36 rule?
The 28/36 rule states that you should use no more than 28% of your monthly income on housing expenses (mortgage payments, property taxes, etc.) and no more than 36% on total debt payments.
Sources
- U.S. Census Bureau and U.S. Department of Housing and Urban Development, “Average Sales Price of Houses Sold for the United States [ASPUS]”, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ASPUS
- Jose Garcia, president and CEO of Northwest Community Credit Union
About Anthony O'Reilly
Anthony O’Reilly is an updates editor for Benzinga. He’s won numerous journalism awards for his coverage of the New York City economy and Long Island school district budgets.