By Kenny Zhu ·September 05, 2023 · 8 minute read
We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey.Read moreWe develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide.We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.Read less
The monthly cost of a $500,000 mortgage is $3,360.16, assuming a 30-year loan term and a 7.1% interest rate. Over the course of a year, you would pay $40,321.92 in combined principal and interest payments.
If you were to opt for a 15-year term instead, a $500,000 mortgage at an interest rate of 6% would cost you $4,219.28 per month, or $50,631.36 per year. (Generally speaking, 15-year terms feature lower interest rates than 30-year terms.)
As you can see, the monthly cost of a mortgage can vary widely depending on your terms; you’ll want to factor this in alongside the other short- and long-term costs of homebuying, like lender fees, property taxes, and maintenance. We’ll guide you through these expenses and how they factor into your budget.
Table of Contents
- Total Cost of a $500K Mortgage
- Estimated Monthly Payments on a $500K Mortgage
- How Much Interest Is Accrued on a $500K Mortgage
- $500K Mortgage Amortization Breakdown
- What Is Required to Get a $500K Mortgage
- The Takeaway
Total Cost of a $500K Mortgage
The total cost of a $500K mortgage is $1,209,657.53 over 30 years at a 7.1% APR. Absent any late or pre-payments, this sums up to $709,657.53 worth of accrued lifetime interest.
When calculating your total costs, you’ll want to factor in other expenses like closing costs, as well as property taxes and insurance, which are incurred for as long as you own your home. We’ve categorized these expenses into upfront and long-term costs below.
💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you from start to finish.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Upfront Costs
Your average upfront closing costs will usually set you back 2% – 5% of the total purchase price on your home. The actual amount varies depending on your local tax rate and third-party fees. Closing costs typically include the following:
• Abstract and recording fees: $200 to $1,200 and $125, on average, respectively
• Application fees: up to $500
• Appraisal fees: $300 to $400
• Attorney fees: $150 to $400/hour
• Home inspection fee: $300 to $500, on average
• Title search and title insurance fees: $75 to $200
The other two major upfront costs include the earnest money deposit and your down payment on the house. Your earnest money deposit shows the seller that you’re serious about buying the home, while the down payment serves as security for your mortgage lender. Average down payments usually range from 3% – 20% of the home’s purchase price, based on most popular mortgage underwriting guidelines. Earnest money and the down payment differ from closing costs as you’ll recoup these, in the form of equity in your home, after closing.
Long-Term Costs
Long term costs on a home purchase include property taxes, homeowner’s insurance, and upkeep. Many lenders will simplify your annual payments by rolling taxes into escrow alongside your monthly mortgage payments. Homeowners who opt out of escrow will be responsible for making their own payments.
Property taxes can range from 0.5% – 3% or more of your home’s assessed value. Keep in mind that the assessed value isn’t the same thing as your home’s market value; instead, it is the value local tax assessors use for calculating property taxes.
Average homeowners insurance rates vary widely depending on your state of residence, policy terms, and the condition of your home. Policy rates are usually between $999 and $1,655, according to a study on home insurance policies conducted by Progressive.
Maintenance and upkeep costs are some of the most variable expenses you’ll face on your home. You may have to repair your roof or replace your water heater in some years, but in others, you may get lucky and avoid big expenses. It’s a good idea to set aside 1% – 2% of your home value annually to cover these projects if they pop up.
Estimated Monthly Payments on a $500K Mortgage
As noted above, your estimated monthly payment for a $500K mortgage will be $3,360.16, assuming a 30-year loan term and an interest rate of 7.1%. But this payment could range between $2,600 and $4,900 depending on your term and interest rate. It’s helpful to take a closer look at how these factors impact the monthly charge, as we have in the chart below.
Monthly Payment Breakdown by APR and Term
Assuming both 30-year and 15-year loan terms, we’ve broken down the monthly payment estimates for interest rates ranging from 5% – 8.5%. If you don’t see your rate below, try using our mortgage payment calculator to estimate your required monthly payment.
| Interest rate | 30-year term | 15-year term |
|---|---|---|
| 5% | $2,684 | $3,953 |
| 5.5% | $2,838 | $4,085 |
| 6% | $2,997 | $4,219 |
| 6.5% | $3,160 | $4,355 |
| 7% | $3,326 | $4,494 |
| 7.5% | $3,496 | $4,635 |
| 8% | $3,668 | $4,778 |
| 8.5% | $3,844 | $4,923 |
Recommended: The Cost of Living by State
How Much Interest Is Accrued on a $500K Mortgage?
A $500K mortgage with a 7.1% APR will accrue $709,657.53 worth of total interest over 30 years. A 15-year mortgage with the same loan balance and interest rate will accrue $313,985.44 in interest over the lifetime of the loan.
Interest accrues directly in relation to your outstanding loan balance, APR, and rate of repayment. The faster you repay your home loan, the less time interest has to accrue.
Additionally, larger loan balances will accrue more interest at any given rate, as larger balances mean a larger principal base on which interest is calculated. Similarly, higher interest rates accrue interest faster, as the APR multiple used to calculate your interest expense is greater for all loan balances.
💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls.
Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
$500K Mortgage Amortization Breakdown
It’s helpful to put monthly payments on a $500K mortgage in context by looking at an amortization schedule, which breaks down payments by interest and principal. In the example below of a 15-year, $500,000 mortgage at 6%, you can see that only $21,208.34 worth of principal was paid off after the first year, despite having made more than $50,000 worth of total payments. This is due to the front-weighted nature of amortizing loans.
Interest is calculated off the total principal amount of the loan outstanding. This means that your interest expense will be greater during the early years of home loan, when the remaining loan balance is greatest.
As time passes and principal is paid off, your interest expense will gradually decrease over time. This is why many homebuyers choose to contribute a larger down payment upfront to avoid having to pay more interest.
| Year | Beginning balance | Principal paid | Interest paid | Remaining balance |
|---|---|---|---|---|
| 1 | $500,000 | $21,208.34 | $29,423.07 | $478,791.66 |
| 2 | $478,791.66 | $22,516.42 | $28,114.99 | $456,275.24 |
| 3 | $456,275.24 | $23,905.18 | $26,726.23 | $432,370.06 |
| 4 | $432,370.06 | $25,379.60 | $25,251.81 | $406,990.46 |
| 5 | $406,990.46 | $26,944.96 | $23,686.45 | $380,045.49 |
| 6 | $380,045.49 | $28,606.87 | $22,024.54 | $351,438.62 |
| 7 | $351,438.62 | $30,371.28 | $20,260.13 | $321,067.35 |
| 8 | $321,067.35 | $32,244.51 | $18,386.90 | $288,822.84 |
| 9 | $288,822.84 | $34,233.28 | $16,398.13 | $254,589.55 |
| 10 | $254,589.55 | $36,344.72 | $14,286.69 | $218,244.84 |
| 11 | $218,244.84 | $38,586.38 | $12,045.03 | $179,658.46 |
| 12 | $179,658.46 | $40,966.30 | $9,665.11 | $138,692.16 |
| 13 | $138,692.16 | $43,493.01 | $7,138.40 | $95,199.14 |
| 14 | $95,199.14 | $46,175.57 | $4,455.84 | $49,023.58 |
| 15 | $49,023.58 | $49,023.58 | $1,607.83 | $0 |
What Is Required to Get a $500K Mortgage?
To qualify for a $500K mortgage, you’ll need to ensure that you meet the income, credit, and down payment requirements, while still having enough leftover to cover additional long-term costs like taxes and home insurance.
While income requirements can vary by lender, a good rule of thumb to follow is the 28% rule, which states that your total housing costs should make up no more than 28% of your monthly gross income. This isn’t a hard and fast rule, but serves as a good indicator of whether you can afford your mortgage.
For example, if your $500K mortgage carried a 6% APR and a monthly payment of $2,997, and you had another $300 in monthly housing costs, you’d need a minimum gross monthly income of $12,000, or annual income of $144,000, to fall within the 28% rule.
You’ll also need a minimum credit score of 620 or higher to meet the lender’s credit guidelines. 620 is only the minimum bar to qualify according to mortgage lending guidelines, and your likelihood of approval may still be tenuous at this level.
In most cases you’ll want your credit score to be much higher; preferably 740 or more, to ensure you can qualify for the most competitive interest rates.
Finally, depending on the type of mortgage loan you obtain, you’ll need to provide a minimum down payment on the home. In many cases, this is 20% of the overall home value. For a $625,000 home with a $500,000 mortgage, a 20% down payment would be $125,000.
The Takeaway
Committing to pay off a $500,000 mortgage loan is a significant decision. You’ll be on the hook for thousands of dollars a month in mortgage payments. Even slight variations in your interest rate can increase the lifetime cost of the loan by tens of thousands of dollars, so looking carefully at your mortgage’s total cost is important.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
How much does a $500,000 mortgage cost per month?
The monthly cost of a $500,000 mortgage can vary widely based on your quoted interest rate and loan term. Assuming a 6% APR and 30-year term, a $500,000 mortgage would cost you a $2,997 monthly payment, without factoring in any taxes or insurance.
What credit score is required for a $500K mortgage?
A $500,000 mortgage would fall within the standard guidelines for conventional home loans in most cases. For a standard fixed rate mortgage, Fannie Mae requires a minimum credit score of 620.
Photo credit: iStock/andresr
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circ*mstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOHL0323009
