A really nice couple who reminded me of my neighbors in Louisville called AmeriSave recently. They were upset because they had been approved for a $350,000 loan, but their estimated monthly payment was almost $500 higher than what they had figured out using an online calculator.
You might not think this happens a lot. But it does.
It's not enough to just type numbers into a calculator to understand what goes into your mortgage payment. It's important to know the whole story and what you're really getting into when you agree to buy a home. And to be honest, that picture has changed a lot in the last few years.
When I first started helping people with their mortgages after moving from underwriting, the average payment seemed reasonable for most middle-class families. But because home prices are going up and interest rates are up and down, the mortgage payment landscape looks very different today. Some months I look at the numbers and remember how much easier it was to plan my mortgage payments when I bought my house.
This guide will show you what the average mortgage payment will be in 2026, break down what goes into that number, show you how it changes by state and county, and most importantly, help you figure out what your payment might realistically be. The national average is helpful, but what's most important is knowing your own situation.
The average monthly mortgage payment across the United States in 2025 was $2,329, according to industry analysis based on current home prices and interest rates. This is just the principal and interest; property taxes and insurance are not included in this number.
That means it's 21% more than the average of $1,924 in 2023. If you're seeing an increase of more than $400 a month, that means the average American borrower will have to pay almost $5,000 more a year for housing.
We used the average home purchase price for each area, a 30-year fixed-rate mortgage, and the most recent 52-week average interest rate of 6.68% from the Freddie Mac Primary Mortgage Market Survey as of August 2025.
Don't panic about that number yet; it's just an average. It has both expensive areas, like San Francisco, and less expensive ones, like rural Kentucky. There are a number of things that will affect how much you actually pay, such as where you buy and how much you put down.
Home prices keep going up: The U.S. Census Bureau's New Residential Sales data shows that the average price of new homes sold in the U.S. in August 2025 was $420,300. If you compare that to the numbers from before the pandemic, which were around $320,000 in early 2020, that's a rise of about 31% in just five years.
Interest rates are still high: Rates have dropped a little from their 2023 highs of over 7%, but the current average of 6.68% is still much higher than the rates below 3% that borrowers enjoyed during the pandemic years. For example, if you have a $400,000 loan and the interest rate goes up by 1%, your monthly payment will go up by about $240.
Taxes and insurance on property are going up: Your mortgage may stay the same, but your escrow payments for taxes and insurance have been going up, especially in states that have had natural disasters or are growing quickly. For example, homeowners in Florida and Texas have seen their insurance rates go up a lot.
I've seen this change happen in real time with our borrowers at AmeriSave. To be honest, the conversations I have about budgeting today are very different from the ones I had three or four years ago.
Some states have seen very big jumps. From 2023 to 2025, homeowners in Connecticut saw a shocking 109.1% increase, which more than doubled their average payment. Nebraska went up 50.1%, Maine went up 45.4%, and Minnesota went up 36.9%.
The reasons for these increases are different in each area. In Connecticut, the rise seems to be linked to both rising home prices in the suburbs and higher property tax assessments. Maine's rise is due to more remote workers and retirees moving there, which has raised the value of coastal property. Nebraska's rise is linked to a strong agricultural economy and a lack of available housing.
Some states, on the other hand, saw real drops. The average payment in Hawaii went down by 52.9%, which is probably because the real estate markets that depend on tourism have changed. Washington D.C. went down 11.1% and Alaska went down 15.2%.
West Virginia: $1,543
Michigan: $1,506
Hawaii: $1,614, even though home prices are high. This is because the market is changing right now.
Oklahoma: $1,687
Alabama: $1,749
Connecticut: $4,635
California: $3,672
Massachusetts: $3,241
Vermont: $2,929
District of Columbia: $2,877
There is a big difference in price between the most and least expensive states. A homeowner in Connecticut pays about three times as much each month as a homeowner in West Virginia, or $3,092 more every month, or $37,104 more every year.
San Diego County leads with the highest average payment at $4,701 monthly. That's $56,412 per year just in principal and interest. Compare that to Dallas County at $1,831 monthly, and you see why many Texans moving to California experience sticker shock.
Even within California, the variation is significant. Los Angeles County averages $3,984 while San Diego is $4,701. That's a $717 monthly difference despite being in the same state.
Looking at county averages gives you a more realistic picture than state averages alone. If you're considering a move within a state or trying to decide between neighboring counties, this granular data helps you budget more accurately.
For instance, if you're looking at the greater Phoenix area versus Southern California, you're comparing a $2,786 monthly payment to somewhere between $2,937 and $4,701. That $1,000 to $2,000 monthly difference translates to $12,000 to $24,000 annually, which can fundamentally change your quality of life and financial flexibility.
At AmeriSave, we work with buyers across all these markets, and I can tell you the conversation changes dramatically depending on where someones purchasing. A $400,000 home in Dallas feels very different financially than a $400,000 home in Los Angeles, even though the loan amount is identical.
The averages give you context, but your specific payment depends on several controllable and uncontrollable factors. Let's break down each one.
This is the foundation of your payment calculation. The more expensive the home, the larger your loan amount assuming the same down payment percentage, and the higher your monthly payment.
Home price: $350,000
Down payment: $70,000 or 20%
Loan amount: $280,000
Interest rate: 6.68%
Monthly P&I payment: approximately $1,803
Home price: $400,000
Down payment: $80,000 or 20%
Loan amount: $320,000
Interest rate: 6.68%
Monthly P&I payment: approximately $2,061
That $50,000 increase in home price adds $258 to your monthly payment, or $3,096 annually.
The more you put down upfront, the less you need to borrow. This directly reduces your monthly payment and the total interest you'll pay over the life of the loan.
But heres the reality I talk through with borrowers all the time: saving for 20% down can take years, during which home prices and interest rates might change. Sometimes putting down less and buying sooner makes more financial sense than waiting years to save a larger down payment. It depends on your specific market conditions and financial situation.
Interest rates have an enormous impact on your monthly payment. Even small differences in rate create substantial payment variations.
The difference between a 5.50% rate and a 7.50% rate is $395 monthly, $4,740 annually, on the same loan amount. Over 30 years, that's $142,200 more in interest payments.
Your credit score, higher scores generally get better rates
Your loan-to-value ratio, more equity often means better rates
The loan type: conventional, FHA, VA, USDA
Current market conditions
Discount points you choose to pay upfront
Whether you lock your rate or float
At AmeriSave, we help borrowers understand their rate options and often see opportunities to improve rates through credit score optimization or choosing different loan products. Sometimes waiting 3-4 months to improve your credit score by 20-30 points can reduce your interest rate by 0.25% to 0.50%, saving thousands over the loan's life.
The most common mortgage term is 30 years, but 15-year, 20-year, and even 10-year loans exist. Shorter terms mean higher monthly payments but substantially less interest paid over time.
The monthly payment difference between 30 and 15 years is $713, but you save $219,060 in interest over the loan's life. Whether that trade-off makes sense depends on your income stability, other financial goals, and risk tolerance.
I've noticed that borrowers in their peak earning years, typically 45-55, often prefer 15-year loans to pay off their home before retirement, while younger borrowers typically choose 30-year loans to keep payments lower while building their careers.
Property taxes vary dramatically by location and are typically paid through your escrow account as part of your monthly mortgage payment. These taxes fund local schools, infrastructure, emergency services, and other municipal functions.
According to the Tax Foundation's analysis of property tax data, effective property tax rates vary significantly:
New Jersey: Average effective rate of 2.23%
Illinois: Average effective rate of 1.95%
Texas: Average effective rate of 1.60%
California: Average effective rate of 0.71% due to Proposition 13
Hawaii: Average effective rate of 0.28%
New Jersey: $8,920 annually, which is $743 monthly
Texas: $6,400 annually, which is $533 monthly
California: $2,840 annually, which is $237 monthly
Hawaii: $1,120 annually, which is $93 monthly
That's a $650 monthly difference between New Jersey and Hawaii for the same home value. Property taxes can add anywhere from $100 to $1,000+ to your monthly payment depending on your location.
Also keep in mind that property taxes typically increase over time as your home's assessed value rises and local tax rates adjust. Budget for 2-3% annual increases in property tax.
Lenders require homeowners insurance to protect their investment in your property. Insurance costs vary based on location, home value, coverage amount, deductible, and risk factors like proximity to water or wildfire zones.
National average: $1,428 per year, which is $119 monthly
Oklahoma highest: $3,519 per year, which is $293 monthly
Hawaii lowest: $465 per year, which is $39 monthly
Florida high-risk: $2,200 or more per year, which is $183 or more monthly
California wildfire zones: $2,000 or more per year, which is $167 or more monthly
Recent years have seen dramatic insurance increases in certain states. Florida homeowners experienced 30-50% premium increases in 2023-2024 due to hurricane risk and insurer departures from the market. California wildfire zones saw similar spikes.
Your insurance premium depends on: home's replacement cost value, location and natural disaster risk, deductible amount you select, credit score in states where this is allowed, home's age and condition, security features like alarms or sprinklers, and claims history.
One tip I share with borrowers: shop around for insurance. Getting quotes from 4-5 providers can reveal price differences of $500+ annually for identical coverage. Just make sure you're comparing equivalent coverage levels.
Beyond the core components, several other costs may be included in your monthly mortgage payment or exist as separate housing expenses.
If you make a down payment of less than 20% on a conventional loan, you'll pay PMI. This insurance protects the lender if you default, and it typically costs between 0.5% and 1.5% of your original loan amount annually.
Loan amount: $320,000
PMI rate: 0.85% annually
Annual PMI cost: $2,720
Monthly PMI cost: $227
The good news is that PMI isn't permanent. Once you reach 20% equity either through paying down principal or home appreciation, you can request PMI removal. On conventional loans, PMI automatically cancels once you reach 22% equity through scheduled payments.
FHA mortgage insurance differences: FHA loans have different rules. You pay both an upfront mortgage insurance premium, 1.75% of the loan amount typically rolled into the loan, and an annual mortgage insurance premium.
For FHA loans originated after June 2013 with down payments below 10%, the annual mortgage insurance continues for the life of the loan. You can only remove it by refinancing to a conventional loan once you have 20% equity.
If you buy a condo, townhouse, or home in a planned community, you'll likely pay HOA fees. These fees cover maintenance of common areas, amenities, insurance for shared structures, and sometimes utilities.
Basic suburban HOA: $25-$100 monthly
Townhouse community: $150-$300 monthly
Full-service condo: $300-$800 monthly
Luxury high-rise: $500-$1,500+ monthly
High-rise condos in cities like New York, Chicago, or Miami can charge $1,000+ monthly for amenities like doormen, fitness centers, pools, and common area maintenance.
Important note: Unlike your mortgage payment, HOA fees typically increase 3-5% annually to keep pace with maintenance costs and inflation. Factor this into your long-term budget.
Some lenders include HOA fees when calculating your debt-to-income ratio for loan qualification, so high HOA fees can reduce the loan amount you qualify for.
While not part of your mortgage payment, home maintenance is a real ongoing cost that new buyers often underestimate.
A common budgeting rule suggests setting aside 1% of your home's value annually for maintenance and repairs. On a $350,000 home, that's $3,500 per year or roughly $292 monthly.
Wait, actually that 1% rule might be conservative for older homes. If your home is over 20 years old, consider budgeting 2-3% to account for aging systems like HVAC, roofs, and appliances that will eventually need replacement.
Roof replacement: $5,000-$15,000, lasts 20-30 years
HVAC replacement: $3,500-$7,500, lasts 15-20 years
Water heater replacement: $800-$1,500, lasts 8-12 years
Foundation repairs: $2,000-$15,000+, varies dramatically
Sewer line replacement: $3,000-$10,000
I remember when my own HVAC system failed last summer. Cost me $6,200 for a full replacement. Even though I work in mortgages and should know better, I still wasn't quite prepared for that hit. It's a good reminder that the mortgage payment is just one piece of the total cost of homeownership.
Utilities are another post-purchase expense that varies by region, home size, and energy efficiency:
Electric: $100-$250 monthly, more in extreme climates
Natural gas: $30-$150 monthly, higher in winter
Water and sewer: $50-$100 monthly
Trash collection: $15-$50 monthly
Internet and cable: $50-$150 monthly
Total utility costs: approximately $250-$700 monthly depending on location and home size.
Energy-efficient homes with modern insulation, energy-efficient windows, and newer HVAC systems can save $100-$200 monthly on utilities compared to older less efficient homes.
Now that you understand all the components, let's walk through calculating your specific payment. While online calculators make this easy, understanding the math helps you see how different variables affect your payment.
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate, annual rate divided by 12
n = Number of payments, years × 12
Let's calculate the payment for a typical home purchase:
Home price: $350,000
Down payment: $70,000, which is 20%
Loan amount: $280,000
Interest rate: 6.68% annually
Loan term: 30 years
Annual rate: 6.68% = 0.0668 Monthly rate or r: 0.0668 ÷ 12 = 0.00557
n = 30 years × 12 months = 360 payments
[ 0.00557(1+0.00557)^360 ] / [ (1+0.00557)^360 - 1 ] M = 280,000 [ 0.00557 × 7.165 ] / [ 7.165 - 1 ] M = 280,000 [ 0.0399 ] / [ 6.165 ] M = 11,172 / 6.165 M = $1,812 for principal and interest only
Principal & Interest: $1,812
Property taxes, estimate 1.2%: $350 monthly
Homeowners insurance: $125 monthly
PMI: $0 because of 20% down payment
HOA fees: $0 for single-family home
Honestly, unless you love math, use an online mortgage calculator. At AmeriSave, we offer calculators that let you adjust variables and immediately see how different scenarios affect your payment.
The value in understanding the formula isn't doing manual math, its recognizing how dramatically each variable affects your payment. When you see that a 0.5% rate difference changes your payment by $85 monthly, or that property taxes in one county versus another add $200 monthly, you can make more informed decisions about where and how to buy.
If the average payments we've discussed feel overwhelming, there are several legitimate strategies to reduce your monthly obligation.
We covered this earlier, but it's worth emphasizing. Every additional dollar you put down reduces your loan amount and potentially eliminates PMI once you hit 20%.
If you're flexible on timing, consider delaying your purchase by 6-12 months to save a larger down payment. Run the numbers, sometimes paying rent for another year while saving an extra $20,000 for down payment results in lower total housing costs after you buy.
Your credit score directly impacts your interest rate. According to myFICO's loan savings calculator, the rate difference between credit score tiers can be substantial:
760-850 credit score: 6.5% rate = $1,896 monthly
700-759 credit score: 6.7% rate = $1,939 monthly, adds $43 per month
660-699 credit score: 6.9% rate = $1,982 monthly, adds $86 per month
620-659 credit score: 7.4% rate = $2,084 monthly, adds $188 per month
The difference between excellent credit at 760+ and fair credit at 660 costs $86 monthly or $1,032 annually, $30,960 over 30 years.
Pay down credit card balances below 30% utilization
Don't close old credit cards, this hurts credit age
Pay all bills on time for at least 6 months before applying
Dispute any errors on your credit report
Avoid opening new credit accounts before applying for a mortgage
Sometimes waiting just 3-4 months to implement these strategies can improve your score by 20-40 points, securing a better rate.
Conventional loans typically require 3-5% down, though 20% avoids PMI, and offer competitive rates for borrowers with good credit.
FHA loans allow as little as 3.5% down and accept lower credit scores, as low as 580 though some lenders require higher. They require both upfront and ongoing mortgage insurance.
VA loans for qualifying veterans and service members offer 0% down with no PMI and typically competitive interest rates. This can dramatically reduce monthly payments.
USDA loans offer 0% down for rural property purchases for qualifying borrowers, also without PMI.
At AmeriSave, we help borrowers evaluate which loan type optimizes their specific situation. Sometimes an FHA loan with 3.5% down costs less monthly than a conventional loan with 5% down, even accounting for FHA's mortgage insurance.
We've seen the dramatic payment differences between states and counties. If you have location flexibility, consider:
Slightly farther from the city center, often 20-30% cheaper
Up-and-coming neighborhoods before they fully gentrify
Adjacent counties with lower property taxes
Remote work has made location more flexible for many
Moving from a high-cost to moderate-cost state can cut your payment by $1,000+ monthly
Example scenario: If you're paying $3,500 monthly in Los Angeles County and move to a similar home in Riverside County at $2,882 monthly, you save $618 monthly or $7,416 annually. Over thirty years, that's $222,480 in reduced housing costs, money that could go toward retirement, investments, or other goals.
I know this sounds obvious, but it's worth stating directly: buying at the top of your budget approval doesn't mean you should. Many buyers get approved for $450,000 but would feel much more financially comfortable at $380,000.
Consider this: A $70,000 difference in purchase price with 20% down changes your loan amount by $56,000 and reduces your monthly payment by roughly $360. That's breathing room for:
Building emergency savings
Contributing to retirement accounts
Managing unexpected expenses
Reducing financial stress
Sometimes the best financial decision is choosing the smaller house that lets you sleep better at night.
If you can get to 20% down, you eliminate PMI entirely. On a $350,000 purchase, that saves roughly $240 monthly or $2,880 annually until you would have otherwise reached 20% equity.
Gift money from family members, allowed by most loan programs
Down payment assistance programs, available in many states
Using retirement funds, IRA withdrawals for first-time buyers
Delaying purchase to save more
ARMs offer lower initial interest rates than fixed-rate mortgages, reducing your payment for an initial period. They carry risk when rates adjust.
5/1 ARM: Fixed rate for 5 years, then adjusts annually
7/1 ARM: Fixed rate for 7 years, then adjusts annually
10/1 ARM: Fixed rate for 10 years, then adjusts annually
You plan to sell or refinance before the adjustment period
You expect your income to increase substantially
Current ARM rates are significantly lower than fixed rates
You plan to stay in the home long-term
You need payment stability
You couldn't afford higher payments if rates increase
I'm generally cautious about recommending ARMs to first-time buyers who plan to stay long-term. The payment certainty of a fixed-rate mortgage offers peace of mind that's hard to quantify but extremely valuable.
How your payment is applied to principal versus interest changes dramatically over your loan's life. Understanding amortization helps you see the long-term picture.
Your monthly payment stays the same for a fixed-rate mortgage, but the split between principal and interest shifts over time. Early payments are mostly interest; later payments are mostly principal.
In your first payment, only $260 goes to the principal and $1,670 goes to interest. Almost all of your last payment goes toward paying off the principal.
Over the course of 30 years, you'll pay a total of $694,800, which is $394,800 in interest on top of your original $300,000. You're really paying for the house twice.
Because most of the payments you make early on are interest, making extra principal payments early on in your loan has a big effect.
You'd save a total of $56,389 in interest.
You'd pay off your loan 5 years and 1 month sooner
Your loan term would actually be 24 years and 11 months instead of 30 years.
You will save more than $56,000 over the life of the loan with that extra $100 a month or $1,200 a year. You will also be free of debt more than five years sooner.
Even making extra payments every once in a while is helpful. Paying one extra mortgage payment each year, either in 12 monthly payments or as a lump sum, usually shortens your loan term by 4 to 6 years and saves you tens of thousands of dollars in interest.
Let's look at why some areas have higher or lower average payments than others and what makes each area unique.
The average payment in California is $3,672, which is due to a number of unique factors:
High home prices: Prices stay high because there aren't many homes for sale, the job market is strong, and the weather is nice. The average home price in California is more than $750,000, while the average home price in the US is around $420,000.
Benefits of Proposition 13: Once you buy a home in California, Proposition 13 limits property tax increases to 2% per year, which keeps taxes low for long-term owners. This makes it so that long-time owners pay a lot less in property tax than people who just bought a home that is similar to theirs.
Insurance problems: Because of the risk of wildfires, insurance companies have either limited coverage or left the California market altogether. This has made premiums higher for the companies that are still in business.
Even though the costs are high, many people in California can afford them because wages are rising quickly in the tech and entertainment industries. The state has big problems with affordability for people with middle incomes.
Texas has some of the highest property tax rates in the country, averaging 1.60%, to make up for the fact that there is no state income tax. However, home prices are relatively low.
P&I every month: $1,800
Property taxes: $467 a month or $5,600 a year
Insurance: $180 a month, which is more because of the risk of hurricanes and tornadoes.
Total: $2,447 a month
Texas home prices are lower than those in coastal states, but the high property tax makes monthly payments much higher. Many people in Texas think that the overall tax burden, which includes no state income tax and moderate property tax, is better than states with high taxes.
Connecticut, New Jersey, New York, and Massachusetts all have high home prices and high property taxes, which means that people have to make big monthly payments.
Connecticut's shocking 109% increase in payments from 2023 to 2025 is due to a number of things:
People leaving the suburbs of New York City during and after the pandemic
New construction is limited, which keeps inventory tight.
High property taxes pay for great schools and services
Competition among wealthy buyers is driving prices up.
A lot of borrowers in the Northeast are dual-income professional families that can afford these payments, but it makes it very hard for teachers, police officers, and other middle-class essential workers to afford them.
Michigan, Ohio, Indiana, and other states in the Midwest have some of the cheapest housing in the country, with average payments between $1,500 and $2,000.
Lots of land available for new buildings
Reasonable rates for property taxes
A lower cost of living overall
A good transportation system
Economies of manufacturing and services that are stable
The problem with these markets is that wages and job opportunities are growing more slowly than they are in coastal tech hubs. If your income is lower and you have fewer chances to move up in your career, a lower mortgage payment doesn't matter as much.
For people who work from home and make coastal salaries while living in the Midwest housing markets, the arbitrage opportunity is very big. A software engineer who lives in Ohio and works in San Francisco can become financially independent much more quickly.
Florida needs special attention because it has problems with insurance. Because of the risk of hurricanes and legal problems, many insurance companies have left the Florida market, which has caused premiums to go up a lot.
Insurance costs are two to three times higher than the national average.
Some coastal areas are almost impossible to get insurance for on the private market
Required coverage through the state-backed Citizens Property Insurance, which is often more expensive
Insurance rates will go up by 6% in 2024 and 2025.
Compared to low-risk states, these insurance costs add $150 to $400 to housing costs each month. For a house in Florida worth $350,000:
Monthly P&I: $1,800
Taxes on the property: $292 a month
Insurance costs $250 to $350 a month.
Total: $2,342 to $2,442 a month
Before you buy a home in Florida, you should look into the higher insurance costs and the flood zone and hurricane risk of the property you're interested in. The view of the beach costs more than the mortgage says it does.
In 2025, the average mortgage payment in the US was $2,329. However, how much you pay depends on where you buy, how much you borrow, and the terms of your loan. The national average includes both expensive California markets and affordable housing in the Midwest. Use it as a frame of reference, not as your target number.
Your monthly payment is more than just the principal and interest. Your total housing cost includes property taxes, homeowners insurance, PMI if you put down less than 20%, and possibly HOA fees. When making a budget, include all of these things as well as maintenance, utilities, and emergency repairs.
The best way to do this is to start with a monthly payment that you can really afford, not just what you can afford. Give yourself some extra money for life's surprises, saving for retirement, and the freedom to enjoy your life beyond just paying your rent. A house should make your life better, not make you worry about money all the time.
Every day, we at AmeriSave help borrowers make these kinds of decisions. Our digital tools and knowledgeable loan officers can show you exactly how much your payment would be for different situations, down payments, loan types, or property locations. We can help you figure out if now is the right time for you to buy or if you should wait a few months to improve your credit score or save up a bigger down payment.
If you want to buy a $300,000 home and put down 20%, or $60,000, you would need to borrow $240,000. If you have a 30-year fixed mortgage with an average interest rate of 6.68%, your monthly payment would be about $1,546. That's just a part of what you owe. You will also need to pay property taxes, which vary by location but are usually between 1% and 1.5% of the value of the home each year. This adds $250 to $375 to your monthly payment, plus homeowners insurance, which costs between $100 and $150 a month, depending on where you live. Your total monthly payment, including escrow, would probably be between $1,896 and $2,071. If you put down less than 20%, you'll have to pay PMI every month for about $100 to $150 until you have 20% equity. The exact amount depends a lot on where you are. A home in Texas that costs $300,000 and has high property taxes will cost a lot more each month than the same home in Michigan that has lower taxes.
You can figure out how much house you can afford by starting with a $2,000 monthly payment. However, the answer will depend on your down payment, interest rate, and local property taxes. Let me give you a real-life example. If you can get the current 6.68% interest rate and put down 20%, $2,000 a month will cover about $1,546 in principal and interest, leaving $454 for property taxes and insurance. If you pay $1,500 a year for insurance and 1.2% of your property taxes, that $1,546 a month in P&I will cover a loan of about $240,000. That means the price of the house is about $300,000 with a 20% down payment. But in a state with high taxes, like New Jersey, where property taxes can be 2.5% of the value of a home, that same $2,000 monthly payment only covers a home worth about $260,000. On the other hand, you might be able to afford up to $330,000 in an area with low taxes. The best way to get the most accurate answer is to use AmeriSave's affordability calculator, where you can enter your exact tax rates and get an exact number. You can also talk to one of our loan officers, who can do the exact math for your situation.
How much you make, how much other debt you have, and how much it costs to live in your area all play a role in whether $2,000 a month is a lot for a mortgage. The 28/36 rule is a good rule of thumb for lenders. It says that your housing payment shouldn't be more than 28% of your gross monthly income and your total debt payments shouldn't be more than 36% of your gross monthly income. If you want to stay under the 28% limit, you would need to make at least $7,143 a month, or about $85,716 a year, to pay a $2,000 mortgage. That's just a rule for lending. A lot of financial advisors say that keeping housing costs below 25% of your take-home pay will make it easier to budget. In the U.S., the average mortgage payment is $2,329 per month, so $2,000 per month is a little less than that. This makes it reasonable for a household with a median income. But the situation is very important: $2,000 a month is a much bigger burden for a family that makes $70,000 a year than for one that makes $150,000. Think about your other money goals as well. Even a cheap mortgage can feel limiting if you're trying to save a lot for retirement, pay off student loans, or build up an emergency fund. To figure out what's really comfortable for you, the best thing to do is make a full budget that includes all of your housing costs, such as utilities and maintenance, your savings goals, and your lifestyle expenses.
This is a question I get a lot from homeowners who are confused, and it usually makes them very angry. Even though you had a fixed-rate loan, your mortgage payment went up because your escrow payment for property taxes and insurance probably changed, even though your principal and interest stayed the same. Most lenders put money into an escrow account every month to pay your annual property tax and homeowners insurance bills for you. If either of these costs goes up, your lender has to change your monthly escrow payment so that there is enough money saved up to pay the bills when they come due. When your local government raises tax rates or when the assessed value of your home goes up, which happens all the time as property values go up, your property taxes go up. Inflation in the cost of building, more claims in your area, or changes in risk assessment can all cause homeowners insurance premiums to go up. In the past few years, insurance rates have gone up a lot in states like Florida, California, and Texas. Your lender must do an annual escrow analysis and let you know if your payments change. If there isn't enough money in your escrow account to pay the bills for the next year, your lender will either let you pay the difference as a lump sum or spread it out over twelve months, which will make your payment even higher. Ask your lender for your most recent escrow analysis statement, which shows exactly how much of your payment goes to taxes and how much goes to insurance. Then, compare those amounts to your actual tax and insurance bills to make sure your payment increase is real.
This is one of the most complicated financial questions you'll ever have to answer. The right answer depends on your interest rate, tax situation, risk tolerance, and other financial goals. Let me explain both sides. If you pay off your mortgage early, you'll be sure to get back the same amount of money as your interest rate. If your interest rate is 6.68%, every extra dollar you put toward the principal saves you 6.68% in interest that would have been charged. You'll own your home outright sooner, which will give you peace of mind and lower the amount of money you need to live on in retirement. You don't have to worry about losing your home, and once the mortgage is paid off, you have more money to spend. The case for investing instead: over long periods of time, the stock market has returned about 10% per year on average, which is more than most mortgage interest rates. Your mortgage interest may be tax-deductible, which would lower your interest rate after taxes. Investment accounts let you get your money out quickly. In an emergency, you can get to the money, but home equity is not liquid. Most financial planners say this: if your mortgage rate is over 6%, you should pay it off early; if it's under 4%, you should invest; and if it's between 4 and 6%, it's up to you how much risk you're willing to take. Also, think about your overall financial situation first. Make the most of any employer 401k match; that's free money. Then, before making extra mortgage payments, build up a six-month emergency fund and pay off high-interest debt. A lot of people think that the best way to do things is to split extra money between your mortgage principal and investment accounts. This way, you can pay off your debt and build your wealth at the same time.
You might be able to deduct mortgage interest on your federal tax return, but whether it's a good idea for you depends on a number of things that changed a lot with the Tax Cuts and Jobs Act of 2017. You can now deduct the interest on mortgage debt up to $750,000 for loans taken out after December 15, 2017, or up to $1 million for loans taken out before that date. But this only helps you if you itemize your deductions instead of taking the standard deduction. The standard deduction for single filers in 2025 was $14,600, and for married couples filing jointly, $29,200. The mortgage interest deduction only works if your total itemized deductions, which include mortgage interest, property taxes up to $10,000, charitable donations, and medical bills over a certain amount, are more than the standard deduction. Many homeowners, especially those with smaller mortgages in less expensive areas, find that taking the standard deduction gives them a bigger tax break than itemizing because the standard deduction is higher now. The mortgage interest deduction is most useful for homeowners who live in expensive areas and have a lot of other deductible expenses, like a big mortgage. For instance, if you pay $20,000 a year in mortgage interest and $10,000 a year in property taxes at the SALT cap, plus give money to charity, itemizing would probably save you money. If you're married and your mortgage interest is only $8,000 a year, the $29,200 standard deduction is a better way to save on taxes without having to fill out any paperwork. Talk to a tax professional or use tax prep software to see which method is better for your situation.
If you have a fixed-rate mortgage and interest rates go down a lot after you lock in your loan, your loan rate doesn't automatically change. This is different from having an adjustable-rate mortgage. With a fixed-rate mortgage, the interest rate stays the same for the whole loan term. This means that you might be paying a higher rate than what new borrowers can get right now. This is when it makes sense to think about refinancing. When you refinance, you take out a new loan to pay off your current mortgage, hopefully at a lower interest rate. A good rule of thumb is that refinancing is a good idea if you can lower your rate by at least 0.75 to 1 percentage point. However, this depends on how long you plan to stay in the home and how much closing costs are. For instance, if your current mortgage rate is 7.25% and rates drop to 6%, refinancing a $300,000 loan could save you about $225 a month or $2,700 a year. When you refinance, you have to pay closing costs that are usually between 2% and 5% of the loan amount. For a $300,000 loan, this could be anywhere from $6,000 to $15,000. You should figure out when your monthly savings will cover the closing costs. If you save $225 a month and your closing costs are $7,500, you will break even in 33 months. Refinancing makes sense if you plan to stay in your home for more than that. We have tools at AmeriSave that can help you figure out if refinancing is a good idea for your situation. We can also usually give you quick estimates of closing costs so you can make an informed choice when rates go down.
In the first few years of your mortgage, very little of your payment goes toward paying down your principal. A lot of it goes to interest. This is because mortgages have an amortization schedule that makes you pay interest on the amount you still owe, which is highest at the beginning of your loan. Let me show you some numbers so you can see how they fit together. If you take out a $300,000 loan at 6.68% interest and pay $1,930 a month, your first payment will be divided like this: $1,670 goes to interest and only $260 goes to paying off the loan. That means that only 13.5% of your payment goes toward building equity, while 86.5% goes to paying off the loan. When you make your 60th payment, or year 5, the split gets better: $1,594 in interest and $336 in principal. At the end of year 10, payment 120 shows $1,499 in interest and $431 in principal. After 15 years, you're finally paying about the same amount: $1,376 in interest and $554 in principal. In later years, the balance really does shift in your favor. You pay $1,014 in interest and $916 in principal by the time you pay 300 or 25. Your last payment is mostly principal: $1,920 principal and only $10 interest. Over the course of 30 years, you'll pay $394,800 in interest plus your original $300,000 principal, for a total of $694,800. This is why making extra principal payments early in your loan has such a big effect. You're lowering the amount that future interest is based on. You can save more than $50,000 in interest and shorten your loan term by almost 5 years by paying an extra $100 a month toward the principal from the start.
This question is one of the most important strategic choices first-time buyers have to make, and there isn't a single right answer. It all depends on where you live, the interest rates, and your own finances. Let me go over both sides so you can choose which one makes the most sense for you. The case for waiting to save 20% down: you avoid paying PMI, which costs $100 to $300 a month depending on the size of the loan and saves you about $30,000 to $90,000 over the life of the loan; you start with equity right away, which gives you a financial cushion; your monthly payment is much lower, which gives you more room in your budget; and you might be able to negotiate better from a stronger financial position. The case for buying sooner with less down: home prices usually go up by 3% to 5% a year in most markets, so if you wait 2 to 3 years to save more for a down payment, the home you want might cost 10% to 15% more, which could cancel out the benefit of your larger down payment; you build equity through appreciation and principal paydown right away instead of paying rent; homes sell quickly because of low inventory, so waiting could mean missing out on opportunities; and PMI isn't permanent. You can get rid of it once you have 20% equity through paydown and appreciation. For example, you could buy a $350,000 home today with 5% down, which is $17,500, or you could wait 2.5 years to save 20% down, which is $70,000. If the home goes up in value by 4% every year for those 2.5 years, it will cost about $388,500. Your 20% down payment buys you a smaller house than your 5% down payment would have bought you in the past. You also paid rent for 2.5 years, which could have been $1,800 a month or $54,000 total, instead of building equity. In this case, buying sooner with a 5% down payment puts you in a better financial position, even though you have to pay PMI for a few years. If prices in your market are not going up or down, it makes more sense to wait. The most important thing to know is where your local market is going. Is it going up quickly? If so, buy sooner. If it's staying the same, save more. If it's going down, wait.
Fact Checked