How Much a $400,000 Mortgage Will Cost You

The average home in America costs approximately $280,000 to purchase. In many areas, homes go for $600,000 and up. If you are currently looking for a new home, you are probably looking somewhere between these numbers, close to the $400,000 range.

In that case, it is wise to question how much you’ll end up paying for a mortgage of that size. Calculating this number is based on several factors, such as interest rates, origination fees, closings costs, and many other variables. Keep reading to get an idea of how much a $400,000 mortgage will cost you.

Mortgage Calculator

The easiest way to calculate how much your $400,000 mortgage will cost you is to use a mortgage calculator. This is an online tool that calculates the numbers you plug in and gives you an idea of what everything will cost.

Before applying for a mortgage, you’ll want to shop around and play out different financial scenarios. Mortgage calculators are extremely helpful when determining which mortgage is right for you because they allow you to do the following.

Additional home costs

Many homebuyers don’t consider the additional costs of purchasing a home. These extra costs, such as HOAs (homeowners’ association dues), property taxes, interest on the mortgage, home insurance, and even private mortgage insurance, can add up. If you don’t take them into account, you could end up with a mortgage you can’t afford. A mortgage calculator helps you include these extras in your estimate.

Monthly mortgage payments

One of the best features of a mortgage calculator is that it can estimate your monthly mortgage payment. Knowing how much your monthly payment will be can help you determine whether a property is in your price range. You can also use the calculator to observe how other variables change the estimated monthly payment.

Your monthly payment will be determined based on the principal and interest on the loan, the loan’s life, and the loan type, meaning fixed or variable.

Stay within your budget

Mortgage calculators help you stay within your budget. The tool is unbiased and will present you with factual numbers based on the information you enter. This gives you the ability to let go of any homes that are out of your price range because you have the numbers right in front of you. It is easy to become attached to a property during the homebuying process; however, you don’t want to buy a home that you can’t afford.

Preview different scenarios

Because a mortgage calculator does the math in seconds, you can easily plug in variable numbers to get an idea of what different scenarios may cost. You can determine how much different interest rates, loan terms, and other variables will change your overall cost of a $400,000 mortgage. This helps you decide your bottom line and what you will look for in a lender.

Understanding What a Mortgage Calculator Calculates

Although a mortgage calculator does the math for you, you’ll need to know what numbers to put into the calculator, as well as how to read the results to fully understand the potential cost of your mortgage. Mortgage calculators take the following factors into account when providing estimates.

Purchase price

The first number the calculator will need is the purchase price of the home you are looking at. This is a straightforward number, which usually appears on the property’s listing online.

Down payment

If you are planning to make a down payment on the home, you will also put this number into the calculator. A down payment can influence the interest rate of the loan. Estimate your available down payment and plug this number in to determine its effect on the costs.

Mortgage APR

The APR, or annual percentage rate, of your mortgage, is another critical number to put into the calculator. You might be able to plug in your credit score instead, as interest rates are based on this number. The calculator will default to a national average unless you put in a specific APR rate. A lower mortgage rate means less money spent in interest payments, so plugging in a few different percentages helps determine how much a $400,000 mortgage will cost you.

Term of the loan

Mortgage loans are usually 15 or 30 years. You’ll need to know which term you prefer so that you understand the calculator’s estimates. 15-year terms may cost more in the short term but less in the long run. Many people stick with the typical 30-year fixed mortgage because it allows for predictability and long-term planning. Most calculators default to 30 years, so make sure to change this number if you aren’t going that route.

Property taxes

As a homeowner, you will pay property taxes every year. This number varies by region, so you will want to find your county’s average for an accurate estimate. The calculator will default to a national average if you just want a rough idea of how much property taxes will add to your mortgage cost.

HOA dues

Not all homes are subject to homeowners’ association fees, but you may still want to factor in these costs while house hunting. Determine if the property you are looking at will require this fee and enter the number for an accurate estimate of your mortgage costs.

Homeowners’ insurance

All homeowners must have insurance before being approved for a loan. The bank technically owns the property until you pay off the mortgage, so insurance is non-negotiable. The calculator will default to a national average; however, some areas require flood and earthquake coverage. You’ll want to plug these numbers in so they give you an accurate estimate.

Sometimes mortgage lenders will set up an escrow account at closing to cover property taxes and insurance fees, so this can alter your monthly payment amount.

Costs of the Mortgage at the Bank

Eventually, during the homebuying process, you’ll end up at the bank. There are specific fees that will tack on additional amounts to your mortgage calculator estimates during these steps that you’ll want to be aware of. These are namely origination fees and closing costs.

Origination fees

Origination fees are costs that are tacked on to the cost of the loan. These can include an underwriting fee, administrative fee, or processing fee and are added to increase the lender’s profit on the loan. Origination fees are often around $1,000, but they can be negotiable. Expect to see this extra cost on your loan.

Closing costs

Closing costs are included in your mortgage and go toward the services performed by your mortgage lender. These fees are in addition to the home’s actual price and must be paid when you sign the paperwork. These fees legally must be disclosed before you close on the loan, so you should know what they are before the final signing.

How You Can Lower the Cost of Your Mortgage

Determining how much a $400,000 mortgage will cost you is based on the variables presented above. You will need to use a mortgage calculator to estimate how these factors increase or decrease your monthly payments and the total cost over the life of the loan.

If you have plugged these numbers in and are concerned with the potential cost of your mortgage, there are a few things you can do to lower your monthly payment, get a better interest rate, and possibly reduce the overall cost of your home loan.

Option #1: Increase your credit score

Your credit score plays a big part in the cost of your mortgage. Increasing your credit score over time may lead to a lower interest rate and better offers from lenders when it comes time to apply for a mortgage or refinance your existing loan. Becoming financially prepared to buy a house is essential, and it also helps you lower the overall cost of your mortgage. Lenders like to work with prepared borrowers, so make sure you take all the steps necessary to get your credit in order and increase your credit score before buying.

Option #2: Refinance your existing mortgage

If you already have a mortgage, you can always consider refinancing your home to lower your mortgage costs. If you have a $400,000 mortgage that is costing you too much because of a high-interest rate or shorter term, explore the possibility of refinancing the loan to lock into a lower interest rate or spreading out your payments.

mortgage calculator

Speak With a Loan Officer Today

It may help to speak with a lender that can help give you an idea of what a $400,000 mortgage will cost you. Call T&I Credit Union at (248)397-9471, so a loan officer can assist you today.

About Jeff Jacobs

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