It’s impossible to give a hard and fast answer as to how much the monthly payment on a $200K mortgage would be because there are so many individual factors that can impact the total amount. Your mortgage payment includes four components: principal, interest, taxes and insurance (also known as PITI). In particular, taxes and insurance vary widely based on location and other factors, so for simplicity we’ll be focusing only on principal and interest for the purpose of our calculations. There are two driving factors that determine how much mortgage principal and interest you pay each month: loan term length and interest rate. Your loan term is the amount of time it will take you to pay back your mortgage loan in full. A shorter loan term means you’re paying more toward your principal balance each month because you have fewer payments to repay the full loan amount. Let’s look at an example of how your loan term affects your mortgage payment. At a 7% interest rate, a 30-year fixed $200K mortgage has a monthly payment amount of $1,331, while a 15-year fixed $200K mortgage at the same interest rate has a monthly payment amount of $1,798.Term Length And A $200K Mortgage
It’s important to note that your loan term can also influence your mortgage rate, which we’ll cover in more detail in the next section. Shorter loan terms typically come with lower interest rates. This means you can save money on interest over the life of the loan, not only because the loan will be paid off more quickly, but because your interest rate itself could also be lower.
Interest Rate And A $200K Mortgage
The other major factor that influences your monthly mortgage payment on a $200K loan is your interest rate. We already mentioned that the length of your loan can impact your interest rate, but other factors like your credit score, loan-to-value ratio and down payment amount also come into play.
A higher interest rate means a higher monthly payment. For example, a 30-year $200K mortgage with a 7% fixed interest rate would have a monthly payment of $1,331, while the same 30-year $200K mortgage at a fixed interest rate of 7.5% would have a monthly payment of $1,398.
Fixed-Rate Vs. Adjustable Rate Mortgages
It’s worth nothing that your interest rate on a $200K mortgage can either be fixed or adjustable. With a fixed-rate mortgage, you’ll have the same interest rate for the life of the loan. If you choose an adjustable-rate mortgage, your interest rate will go up or down, depending on the market, after a predetermined introductory period.
Other Costs Involved With A $200K Mortgage
When you take out a $200,000 mortgage, your principal and interest aren’t the only costs you'll need to account for. You’ll also need to factor in some money upfront, as well as additional money each month to cover other recurring expenses that may be rolled into your mortgage payment. Some of the additional costs to keep in mind as you take out a $200K mortgage:
- Down payment: The amount you’ll need to have for a down payment varies based on your loan type and whether you’re a first-time home buyer. Certain programs will let you put down 3%, which is $6,000 on a $200K home, while others may prefer to put down the full 20%, which is $40,000 on a $200K home.
- Closing costs: Home buyers should also have enough cash saved up to cover their closing costs, which range from 3% – 6% of the loan amount. This means for a $200,000 mortgage, closing costs can range from $6,000 – $12,000.
- Homeowners insurance: Many lenders will divide your homeowners insurance premium by 12 and add that to your monthly mortgage payments. They’ll then hold that money in an escrow account and pay the insurance company on your behalf each year.
- Property taxes: Just like your insurance, you may also pay into an escrow account monthly to cover your property taxes. This is a great way to ensure your property taxes are paid each year rather than having to remember to save for and pay them on your own.
