You know the price of the home you want, but what’s the cost of a mortgage?
You might be surprised just how much that mortgage is going to cost you.
I’m going to give you several examples of various home prices and show you just how much money you’re actually paying the bank over the life of your mortgage.
To calculate the total cost of a 30 year home loan at 7.14% (the current interest rate on the day of writing this) we need to consider both the monthly mortgage payments and the total interest paid over the loan’s duration.
The formula to calculate the fixed monthly payment on a mortgage is:
Monthly Payment = P * (r * (1 + r)^n) / ((1 + r)^n – 1)… blah, blah, blah.
Yes, that’s actually the formula, but for sanity sake, let’s skip the math for now and jump straight to the cost of your mortgage.
Over the course of 30 years, a $200,000 home loan at a 7.14% interest rate will cost you approximately $491,196, including both the principal amount and the total interest paid.
Keep in mind that this calculation assumes constant monthly payments throughout the loan term and doesn’t consider any additional fees or costs that might be associated with the mortgage.
Here’s the total cost of a mortgage for higher priced homes
$300,000 Home = Total Cost ≈ $737,295
$400,000 Home = Total Cost ≈ $982,994
$500,000 Home = Total Cost ≈ $1,228,692
$750,000 Home = Total Cost ≈ $1,843,038
$1,000,000 Home = Total Cost ≈ $2,457,385
As you can see, a mortgage isn’t cheap. Keep this in mind when making the decision on how much to borrow for your next home.
