As far as the simple math goes, a $200,000 home loan at a 7% interest rate on a 30-year term will give you a $1,330.60 monthly payment.
That $200K monthly mortgage payment includes the principal and interest. But here’s where options become evident: How much your interest will cost you each month is determined by your mortgage term and interest rate. You might pay a lower or higher annual percentage rate (or APR), and you might opt for a variable rate loan or a different term (say, 15 years).
Understanding what your total mortgage will cost vs. just the payments on a $200K mortgage can be a smart way to look at your finances when you’re buying a home. If you want to know the full cost of a $200K mortgage, read on for the breakdown so you can make the best decision for your home purchase.
Table of Contents
Total Cost of a 200K Mortgage
The total cost of a $200,000 mortgage may surprise you. Beyond the principal, there are upfront costs to acquire the mortgage as well as long-term costs that come from paying years of interest. Here’s a closer look.
Key Points
• A $200,000 mortgage can cost around $1,000 per month, depending on the interest rate and loan term.
• Factors that affect the monthly cost of a mortgage include the loan amount, interest rate, loan term, and property taxes.
• Private mortgage insurance (PMI) may be required if the down payment is less than 20% of the home’s value.
• Homeowners insurance and property taxes are additional costs to consider when budgeting for a mortgage.
• It’s important to carefully consider your budget and financial goals before taking on a mortgage to ensure you can comfortably afford the monthly payments.
Upfront Costs
These expenses can include the following:
• Closing costs: What you pay to secure a mortgage for the property you want. They include fees for appraisals, title insurance, government taxes, prepaid expenses, and mortgage origination fees.
The average closing cost on a new home is between 3% and 6% of the loan amount. This works out to be between $6,000 and $12,000 for a 200K mortgage.
• Downpayment: While the average down payment on a home is around 13%, you can often elect to put down an amount that works for your financial situation. This is cash you put down vs. the amount you borrow for your mortgage. Some of the most common amounts for a down payment on a $200,000 house can be:
◦ 20% down payment: $40,000
◦ 10% down payment: $20,000
◦ 5% down payment: $10,000
◦ 3.5% down payment: $7,000
◦ 3% down payment: $6,000
Long-Term Costs
The total cost for a 200K mortgage at today’s interest rates is almost half a million dollars. Over the course of the 30-year loan on a $200K mortgage at 7% APR, you will pay $279,017.80 in interest for a total cost of $479,017.80.
It’s a bit of a surprise to most borrowers that the amount they will pay in interest exceeds the price of the home. After all, $279,000 in interest costs for a $200,000 home doesn’t seem like it would come from a 7% APR, but that’s how mortgage APR works.
By choosing a mortgage term that’s 15 years, you substantially decrease the total 200K mortgage cost. The monthly payment on a 15-year loan at 7% APR increases to $1,797.66 from $1,330.60 for a 30-year mortgage. But 15 years of interest will cost $123,578.18 with a 7% APR, bringing the total cost of the principal plus interest to $323,578.18.
To compare the 15-year vs. 30-year mortgage that costs $479,017.80, that’s a savings of $155,439.62. In short, if you’re able to pay another $450 on your mortgage every month, you’ll save over $100,000 during the course of your loan.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Estimated Monthly Payments of a 200K Mortgage
Since interest costs can vary so much, here’s a handy table to help you estimate what your monthly home mortgage loan costs would be for a $200,000 mortgage. The APR can vary considerably, depending on the lender, whether you choose variable or fixed rate, and other loan specifics.
| APR | 15-year loan payments | 30-year loan payments |
|---|---|---|
| 3.5% | $1,429.77 | $898.09 |
| 4% | $1,479.38 | $954.83 |
| 4.5% | $1,529.99 | $1,013.37 |
| 5% | $1,581.59 | $1,073.64 |
| 5.5% | $1,634.17 | $1,135.58 |
| 6% | $1,687.71 | $1,199.10 |
| 6.5% | $1,742.21 | $1,264.14 |
| 7% | $1,797.66 | $1,330.60 |
| 7.5% | $1,854.02 | $1,398.43 |
| 8% | $1,911.30 | $1,467.53 |
| 8.5% | $1,969.48 | $1,537.83 |
| 9% | $2,028.53 | $1,609.25 |
| 9.5% | $2,088.45 | $1,681.71 |
| 10% | $2,149.21 | $1,755.14 |
Recommended: First-Time Home Buyer Guide
Monthly Payment Breakdown by APR and Term
The APR makes a huge difference in your monthly payment. When your monthly payment is increased because of a higher interest rate, you’ll pay hundreds of dollars more each month as well as tens, if not hundreds, of thousands more over the course of the loan.
Here’s what your monthly $200K mortgage payment and total loan cost will look like in 15-year and 30-year loan terms with different APRs.
| APR | 15-year loan payments | Total loan cost (200K + interest) | 30-year loan payments | Total loan cost (200K + interest) |
|---|---|---|---|---|
| 3.5% | $1,429.77 | $257,357.71 | $898.09 | $323,312.18 |
| 4% | $1,479.38 | $266,287.65 | $954.83 | $343,739.01 |
| 4.5% | $1,529.99 | $275,397.58 | $1,013.37 | $364,813.42 |
| 5% | $1,581.59 | $284,685.71 | $1,073.64 | $386,511.57 |
| 5.5% | $1,634.17 | $294,150.04 | $1,135.58 | $408,808.08 |
| 6% | $1,687.71 | $303,788.46 | $1,199.10 | $431,676.38 |
| 6.5% | $1,742.21 | $313,598.65 | $1,264.14 | $455,088.98 |
| 7% | $1,797.66 | $323,578.18 | $1,330.60 | $479,017.80 |
| 7.5% | $1,854.02 | $333,724.45 | $1,398.43 | $503,434.45 |
| 8% | $1,911.30 | $344,034.75 | $1,467.53 | $528,310.49 |
| 8.5% | $1,969.48 | $354,506.24 | $1,537.83 | $553,617.71 |
| 9% | $2,028.53 | $365,135.97 | $1,609.25 | $579,328.28 |
| 9.5% | $2,088.45 | $375,920.89 | $1,681.71 | $605,415.03 |
| 10% | $2,149.21 | $386,857.84 | $1,755.14 | $631,851.53 |
Again, it’s pretty shocking to see that a $200K mortgage could possibly cost over $600,000 with a 10% interest rate on a 30-year loan. If you want to play around with different numbers, this mortgage payment calculator can help.
200K Mortgage Amortization Breakdown
Amortization shows you how much of your monthly payment is applied to the original loan amount, or principal.
Loans are amortized so that most of your monthly payment goes toward interest each month when you’re just starting to repay your loan. When you’re toward the end of your loan term, most of the money goes toward the principal.
In the example below, of $200K mortgage payments and balances, you’ll see that over the course of the first year, the borrower made $15,967.20 in payments ($1,330.60 per month for 12 months). Of this, $13,935.65 is applied to interest and only $2,031.55 to the principal.
| Year | Mortgage Payment | Beginning Balance | Total Amount Paid for the Year | Interest Paid During the Year | Principal Paid During the Year | Ending Balance |
|---|---|---|---|---|---|---|
| 1 | $1,330.60 | $200,000.00 | $15,967.20 | $13,935.65 | $2,031.55 | $197,968.38 |
| 2 | $1,330.60 | $197,968.38 | $15,967.20 | $13,788.78 | $2,178.42 | $195,789.89 |
| 3 | $1,330.60 | $195,789.89 | $15,967.20 | $13,631.29 | $2,335.91 | $193,453.93 |
| 4 | $1,330.60 | $193,453.93 | $15,967.20 | $13,462.42 | $2,504.78 | $190,949.09 |
| 5 | $1,330.60 | $190,949.09 | $15,967.20 | $13,281.34 | $2,685.86 | $188,263.18 |
| 6 | $1,330.60 | $188,263.18 | $15,967.20 | $13,087.17 | $2,880.03 | $185,383.10 |
| 7 | $1,330.60 | $185,383.10 | $15,967.20 | $12,879.00 | $3,088.20 | $182,294.83 |
| 8 | $1,330.60 | $182,294.83 | $15,967.20 | $12,655.74 | $3,311.46 | $178,983.30 |
| 9 | $1,330.60 | $178,983.30 | $15,967.20 | $12,416.34 | $3,550.86 | $175,432.38 |
| 10 | $1,330.60 | $175,432.38 | $15,967.20 | $12,159.64 | $3,807.56 | $171,624.77 |
| 11 | $1,330.60 | $171,624.77 | $15,967.20 | $11,884.38 | $4,082.82 | $167,541.90 |
| 12 | $1,330.60 | $167,541.90 | $15,967.20 | $11,589.24 | $4,377.96 | $163,163.88 |
| 13 | $1,330.60 | $163,163.88 | $15,967.20 | $11,272.76 | $4,694.44 | $158,469.38 |
| 14 | $1,330.60 | $158,469.38 | $15,967.20 | $10,933.39 | $5,033.81 | $153,435.50 |
| 15 | $1,330.60 | $153,435.50 | $15,967.20 | $10,569.48 | $5,397.72 | $148,037.73 |
| 16 | $1,330.60 | $148,037.73 | $15,967.20 | $10,179.28 | $5,787.92 | $142,249.76 |
| 17 | $1,330.60 | $142,249.76 | $15,967.20 | $9,760.87 | $6,206.33 | $136,043.37 |
| 18 | $1,330.60 | $136,043.37 | $15,967.20 | $9,312.20 | $6,655.00 | $129,388.32 |
| 19 | $1,330.60 | $129,388.32 | $15,967.20 | $8,831.13 | $7,136.07 | $122,252.17 |
| 20 | $1,330.60 | $122,252.17 | $15,967.20 | $8,315.25 | $7,651.95 | $114,600.16 |
| 21 | $1,330.60 | $114,600.16 | $15,967.20 | $7,762.08 | $8,205.12 | $106,394.98 |
| 22 | $1,330.60 | $106,394.98 | $15,967.20 | $7,168.93 | $8,798.27 | $97,596.64 |
| 23 | $1,330.60 | $97,596.64 | $15,967.20 | $6,532.88 | $9,434.32 | $88,162.27 |
| 24 | $1,330.60 | $88,162.27 | $15,967.20 | $5,850.89 | $10,116.31 | $78,045.90 |
| 25 | $1,330.60 | $78,045.90 | $15,967.20 | $5,119.56 | $10,847.64 | $67,198.20 |
| 26 | $1,330.60 | $67,198.20 | $15,967.20 | $4,335.40 | $11,631.80 | $55,566.33 |
| 27 | $1,330.60 | $55,566.33 | $15,967.20 | $3,494.53 | $12,472.67 | $43,093.59 |
| 28 | $1,330.60 | $43,093.59 | $15,967.20 | $2,592.86 | $13,374.34 | $29,719.19 |
| 29 | $1,330.60 | $29,719.19 | $15,967.20 | $1,626.01 | $14,341.19 | $15,377.96 |
| 30 | $1,330.60 | $15,377.96 | $15,967.20 | $589.31 | $15,377.89 | $0.00 |
Recommended: Understanding the Different Types of Mortgage Loans
What Is Required to Get a 200K Mortgage?
To qualify for any mortgage, you will need to show that you can afford a down payment, have a solid credit score, and have a consistent work history, among other factors.
One key qualification is your ability to afford the loan you are applying for. An example: For a $200,000 mortgage with a $1,330.60 payment, lenders look for your housing expenses to be between 25% and 28% of your gross income. That means your monthly income should be at least $4,752.14 for the $1,330.60 payment to meet that guideline. That’s just over $57,000 per year if you have no other debts.
Another way lenders look at how much house you can afford is your debt-to-income ratio (aka your DTI). Lenders look for your total debt expenses (including the new housing payment) to be no more than 36% of your gross monthly income. For a borrower making $10,000 per month, for example, debts should not exceed $3,600 per month, including the new housing payment.
To find your debt-to-income ratio, multiply your monthly income by .36. Set that number aside. Next, add up all of your debt obligations, including car payments, credit cards, hospital bills, etc. Then, add in your new mortgage payment to your existing debt payments.
As a formula, it looks like this:
• Monthly income X .36 = Max debt-to-income ratio.
• Mortgage payment + debts = Total debts
• Max debt-to-income ratio > total debts
Compare the two numbers to see where you stand with the maximum DTI versus your total debts. If you’re not in the desired range, know that some lenders will allow a higher percentage; you might shop around if your DTI is above the 36% mark. However, the terms might not be as desirable. It can be wise to explore your options with a mortgage professional or look online at a home loan help center.
This is an example of why you always hear the advice to pay down debt to qualify for a better, bigger mortgage. The amount of debt you have directly affects how much mortgage you’re able to qualify for.
The Takeaway
Understanding the monthly and total cost of a $200K mortgage can help you understand the options available for financing a home purchase, as well as understand the implications on your long-term financial situation. You can then assess what’s possible and make decisions about the best way to finance a $200K mortgage.
With any mortgage, you’ll want a lender on your side. SoFi Mortgage Loans have dedicated loan officers waiting to help. Competitive interest rates, low down payment options, and a wide range of loan terms can help you make a mortgage for your home possible.
FAQ
How much is a down payment on a 200K house?
A 20% down payment on a 200K house is $40,000. A 5% down payment is $10,000, and a 3.5% is $7,000. Talk with various lenders to see what you might qualify for.
How can I pay a 200K mortgage in 5 years?
Making extra payments or larger lump-sum payments can help you pay off your mortgage faster. For a $200K mortgage amortized over 5 years, you’ll need to pay the original loan amount of $200K, plus five years of interest payments. If you look at the full 30-year amortization chart (above), that’s $68,099.48 in interest and a total of $268,099.48 you’ll need to pay back to the lender.
Over five years and 60 equal payments, this works out to $4,468.32 each month to pay off your mortgage in five years. (Quick side note: the amount of interest you’ll pay in an accelerated five-year repayment plan won’t nearly be this much because your extra payments to the principal will decrease the amount of interest you pay every year.)
How much mortgage can I qualify for on a 200K salary?
How much mortgage you qualify for depends on your income, debt levels, down payment, loan program, and credit score, among other factors. As a rule of thumb, you may be able to qualify for homes between 2 and 3 times your gross annual salary. For a $200K salary, you may be looking for homes in the $400K to $600K range.
Photo credit: iStock/AnnaStills
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