Looking at taking out a $600,000 mortgage, but unsure what your monthly payments will be? There are a lot of factors that play into how much you will pay towards your mortgage each month, so there’s no simple answer for what your monthly amounts will be. Average monthly bills for a $600,000 mortgage vary from around $2500 to $3500, and there are plenty of outliers beyond this range as well.
You can use websites and tools to calculate how much your monthly repayment totals would be on a $600k loan, but it’s also important to look at why your mortgage rate might be different from what other people have to repay for a similar amount, or for a similar looking property. Luckily, you can get a lot of data to help you figure out your expected repayment amounts.
Let’s look at some of the different things that will change what you will be repaying each month, beginning with the things you need to know before looking at buying a property.
What is a mortgage payment?
Your monthly mortgage payment is how much you will be repaying each month to your mortgage provider or bank. You will generally be paying this amount every month, though some lenders might be willing to let you have a ‘payment holiday’, where you can miss one of your monthly payments and not face any negative consequences. However, not all mortgage providers will offer this, and it would need to be arranged in advance – do not just miss one of your monthly payments without approval, as this could cause you problems with the mortgage broker.
Does all the money go towards the house purchase price?
No, when you make your monthly mortgage payment, the fund does not just focus on going towards the original purchase price of the mortgage. There are other costs included that you are covering while you are making payments towards your property loan as well.
What parts make up a mortgage loan?
Let’s look at some of the different things that make up your monthly payment. Knowing what goes into your property loan can help make sure that you have a better idea of what your payments are for, which can help you understand the monthly payment amount that you have to pay.
What is the principal?
The principal is the original amount that you borrow from a mortgage lender or bank in order to buy your property. This amount will usually be the purchase value of the property, minus whatever deposit amount you have paid towards the purchase. However, there may be additional expenses that are included in your principal. This can include any fees that the mortgage lender charges, or fees for a survey or assessment of the property before you purchase it, plus estate agent fees. All of these could be included in the principal value of the loan.
What is the interest on my mortgage?
As well as the principal, you’ll also have to pay interest on your mortgage. This interest is added over time, much like the interest of a normal loan, overdraft, or credit card. Your interest rate will often be shown as a percent of the total loan amount due. This is called an APR or annual percentage rate. We’ll discuss different types of interest and how different APR amounts have effects on your monthly mortgage amounts later on in this article.
What else might I have to pay in my monthly mortgage payments?
In order to get a mortgage, you might have to agree to certain terms and conditions, as set out by the mortgage lender or bank that you borrow funds from. This might mean that you agree to have adequate home insurance. This is usually a requirement of mortgages because companies do not want to risk lending you funds for a property that could get destroyed. While this is sensible, it can often mean a cost that is added to your mortgage payment amount. Sometimes this insurance is arranged through your mortgage lender, but you might need to get private home insurance instead. If so, be sure to add this into your calculations for what you can manage to pay monthly.
What additional costs are there?
When you are looking at your monthly costs for your mortgage, you will also need to consider extra expenses. This can include private home insurance as listed above, as well as other things. For example, you might want to have private mortgage insurance to make sure that you are covered in case something bad happens and you might miss a payment.
You might also need to consider maintenance costs, especially if the home is in a Home Owners Association area, or if you have bought a flat or home with shared communal areas, gardens, a shared pool, or more. On top of this, there are also regular maintenance costs to consider to keep your property looking nice.
There are also a lot of areas where the property tax can be surprisingly high. You should always look at the data for property taxes in the areas you want to live in. You could find that a property or home tax payment for a 600,000 home makes the mortgage payment impossible for you to meet.
What are the different types of interest rates?
Generally, when you are looking to take out a mortgage, you will find two different types of interest options on offer. These are fixed interest and flexible interest. Both will have a significant impact on how much your monthly payment is, so it is important to check what type of interest rate works best for you. You can also use an amortization schedule or a loan table to see how different rates of interest will affect your monthly payment. You will pay a large amount of total interest on your $600,000 mortgage, so you should carefully weigh up the options.
What is a fixed interest rate?
A fixed interest rate means that the interest rate or APR does not change during that period. You will often be told a flat percent value of interest, and this will be your APR for the duration of your mortgage. However, a fixed interest offer is usually only applied for a set number of years, rather than for the whole loan term. After this, you would be switched over to a variable APR.
What is a variable interest rate?
A flexible or variable interest rate means that the interest percentage can go up or down in line with the base interest rate in the country. This means that you can never fully predict the amount of interest you will have to pay on your 600,000 mortgage, which makes it hard to predict what monthly cost you will be repaying.
Which interest rate is better?
Neither a fixed interest rate / fixed APR or a variable rate is better for all people. Instead, you have to pick which one suits you better. Depending on the state of the economy, you could end up paying vastly different amounts monthly depending on which type of interest rate you are on.
For example, if the base interest rate drops, then a variable APR interest offer will be more beneficial than a fixed amount of interest paid. However, if the base interest percentage rises, then you could end up repaying more on a variable rate. Sadly it is hard to predict whether the APR on a fixed rate will increase or decrease, and thus which will lead to having more total interest paid by the end of your borrowing term.
How does borrowing length change the monthly repayments?
One of the biggest factors that will change how much you have to repay monthly is the duration or term of your borrowing. Since you have to repay the total amount – both what you have borrowed, and your APR interest that accrues during the borrowing period – having a longer time to repay the amount that you borrow will let you have lower monthly repayment amounts. This can be very helpful if you are unsure whether you can pay for a property.
Can I always get a longer term for my borrowing period?
You can often get a longer repayment term if the bank agrees to this. You will not always be able to get a longer repayment term. This is because the lender will want to make sure that you can cover your repayment schedule throughout the term of you $600,000 mortgage loan. Most lenders will have a cut off age where you cannot borrow funds from them. This cut off age is usually also when they will no longer let you have a property borrowing agreement wit them. The cut off age is usually at retirement age, since this is the stage in anyone’s life where their finances change most drastically.
For example, a lot of lenders have a cut off age of 65. If you apply to borrow funds for a property at age 45, you may find that you are limited to a 20 year term length. If you apply at age 35, you would find that you can have a 30 year term.
Can my partner’s age change my borrowing term?
Yes, your partner’s age can affect your borrowing term. Anyone who is on the loan’s agreement and is liable for managing the monthly repayment totals must be able to make those payments for the whole term of your borrowing. This usually means that the term allowed is limited by the age of the oldest person. This can sometimes be worked around by having that person removed from the mortgage early, This is not fool-proof, but it can enable you to have a longer term and thus lower your monthly repayment amounts.
What is a deposit?
The deposit or down payment is the amount you pay towards the property when you take out the mortgage. You will have to pay this upfront, so people usually save funds for a deposit. Some people will take out a loan, either with family or from a separate loaning institute such as a bank, to cover their down payment. However, if you do this, you need to consider your downpayment repayments, as well as your monthly mortgage, amounts to make sure that it is feasible for you to cover both. Otherwise, you could end up with more monthly bills than you can manage.
What is LTV?
LTV stands for Loan To Value. This is calculated by looking at the value of the home, against the maximum amount of money that is being borrowed to purchase it. This is relevant to deposits because your Loan To Value is the amount you borrow after handing over the deposit.
For example, if you want to purchase a $660,000 property, you could pay $60,000 up front as your down payment. This is one tenth of the property’s value. This means that your LTV amount would be 90%, as you need to borrow nine tenths of the property’s total cost.
Working out what kind of Loan To Value you can achieve helps you look at different loan types you have available to you, and it helps you see what APR interest options are available. Typically, if you have a lower Loan To Value percentage, you will get lower APR interest offers from lenders and banks. This can lower your monthly bills significantly, and this is why people often aim to save up as much as they can before they purchase a home.
Is the deposit part of the loan?
No, your deposit amount is not a part of your loan amount. This is the amount that you pay up front, so this will not be a factor in your initial loan balance. You can easily work out the rough amount that your loan will be by taking the total price of the property and removing your deposit amount from this total. However, you should also be assuming that there will be other cost add-ons and fees that will be included in the loan total.
What’s the minimum deposit for a mortgage?
The minimum deposit that a bank or lender will accept depends on several things. It is rare to find a mortgage where you can avoid paying a deposit, also known as a 0% deposit mortgage. This is because banks and lenders use the deposit as proof that their clients can manage to save up money for their property purchase – this makes them more confident that their borrower can meet their needed repayment amounts.
Most banks or lenders will offer mortgages from 5% deposit. This means you need 5% of the total property value as your downpayment. This would be a 95% LTV loan. Some lenders will only offer 90% LTV mortgages as the lowest deposit you can give. This would be a 10% down payment.
However, it is worth noting that having a larger deposit will mean that you borrow less in total. This will also mean that you pay less total interest. Having a lower amount borrowed means that you can either pay it off more quickly, or it means that you can make your monthly repayment amount lower.
What total value house could I buy with a $600,000 mortgage?
Assuming the lowest down payment amount you can find is a 5% down payment, then you could purchase a property worth around $630,000 in total. If you have a higher deposit this of course goes up.
What should I do if I’m worried about affording my monthly payment before buying a property?
If you are worried about how you will cover your monthly repayment amounts, you should think carefully before looking at purchasing a property.
You might want to look at saving up more money for a deposit. This will help you lower the amount that you borrow. Lowering the amount that you have to borrow means that you will have less to pay off the principal, and it also lowers the total interest paid over the term of your borrowing. This means that you will likely have a lower monthly repayment, which might help if you are unsure of how much you can manage to cover. This can also help in case you have an unexpected change of circumstances and you can suddenly manage less. We’ll look at more ways to cope with unexpected changes in circumstances later on in this article.
Another route to take if you are worried about whether or not you will manage the monthly repayment amounts on your home is to look for a cheaper property to buy. While most people want to get their dream home right away, there are some advantages to buying a smaller home or ‘starter’ home. The most obvious advantage is that you will be able to have smaller monthly repayments, which should be more manageable. This can help reduce the stress and concerns that you might not be able to cover your repayment amounts month by month. You will often find that property appreciates in value – though this is not always the case, and some economic crashes have made property values fall immensely. This means that even if you are not in your dream home, buying property can often be a good investment.
How do I calculate what monthly payment I can afford?
If you want to figure out what monthly repayment amounts you can manage, you should look closely at your finances. This means looking at every aspect of your bills, outgoings, and incomes. This is important for both first time home buyers and people who are looking to upgrade, move, or downsize. It is always important to figure out what you can reasonably stretch your finances to each month based on your outgoings.
Of course, there are also lots of ways to change what kind of property you can manage to buy. In fact, you might find you can even manage to cover the bills for a more expensive home.
Look at all your incomes
The first thing to look at is the amount of funds you have coming in monthly. You need to look at all of your incomes. This includes incomes from formal employment, self employment, rental income, and more. You should be aware of which incomes are likely to fluctuate over time, or which incomes are stable. Remember, while you might consider your employment income as stable, it is important to bear in mind that unforeseen circumstances can remove your income – this is something you should plan for.
Consider other debts and outgoings
The next step is, of course, to look at your debts and outgoings. This means any other debts you have taken on – whether that’s student debt, debt for buying a car or motorcycle, medical debts, and other debts you might have. You should consider all of these, as well as the loan length of each one, to make sure that you can manage to purchase a home.
Don’t forget new expenses
A lot of people focus on the fact that their monthly repayment amounts will likely be lower than their rent cost. This is true, and it can be a huge factor when a lot of borrowers choose to buy a home. However, it’s also important to look at some expenses that could increase when you buy your own home. This can include maintenance fees, home owner association dues, the possibility of higher electricity and gas bills, and more. Ignoring or forgetting these expenses could lead you to take on a higher monthly repayment amount than you can handle.
Find the best deals you can, but expect some changes when you apply
Obviously it’s normal in this day and age for customers to use a calculator to look at what loans they can get and what they can manage to purchase. This is a great idea to get a look at where the best deals and offers are. It’s definitely worth taking note of which banks and lenders have good offers. However, you should be aware that there may well be changes by the time you actually come to apply – this is because you might not have to input all of your detail when getting a rough estimate. Also, deals can change over time.
What happens if my circumstances change and I can no longer manage my mortgage payments?
This is a big fear for a lot of people – having something come up which makes you unable to cover your debts or bills. It could be a medical emergency, a job loss, a car breakdown, or anything else.
One option is refinancing. This is where you see if you can get a better rate or deal for the debt by moving it to another bank. Of course, is not always possible to refinance your home, so it is worth looking at other options. Another way to look at how to refinance your home is to increase the duration of your borrowing. This can help you lower the amount you have to cover monthly – again, you could use a calculator to look at this option.
Beyond this, it is always worth looking at where you can save funds and cut down on your expenses. This can be everything from cutting down on streaming services to finding new ways to cut your food bill and energy bills. You can follow the four steps for preparing a budget to help make sure that you get your bills and finances in check.
Can I lower my monthly payments?
Yes, there are various ways that you can try to lower your monthly repayment amounts. You should always research and look into the subject as much as possible. Use an amortization schedule to look at how much your standard monthly total would be with your annual percent rate or APR. Once you have seen this, you can look at how it might be affected if you can manage to refinance at a lower APR.
You can then look at whether or not you can cut out anything – for example, while some lending bodies require private mortgage insurance taken out through them, some do not – so cutting out their standard PMI and getting PMI through a third party might save you some cash.
Some banks might also be able to extend your term, which can give you more time to cover the amount you borrowed. However, this is not always possible if you want to stay with your current bank. You might be required to refinance your home.
Beyond this, you might have to move to a cheaper property. This will make the owed balance lower. If you are quite far through your repayment schedule, you might have enough equity in the property to buy a cheaper property outright.
So what is my monthly repayment amount?
Your repayment total depends too much on many factors to get a simple answer. The next way to get an estimate is to look at a computer-based calculator. You should have to just fill in your details and get data on a range of different options for banking services. Do not forget to take the down payment off your balance. You should also aim to add additional fees, taxes, bills, and any mandatory insurance to the balance to make sure that you get the balance as accurate as possible. You might also want to use an amortization schedule to look at different scenarios. It’s also worth checking if you are eligible for any special programs, such as special offers to help first time buyers, veterans, or other specific groups.