Content provided by Credible. Credible is solely responsible for this content and the services it provides. New York Post receives a fee if you click a link below and close a loan through Credible. WHY TRUST CREDIBLE: Our goal is to give you the tools and confidence you need to improve your finances. We do that by creating expert-curated and deeply-researched articles that adhere to our editorial guidelines. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS #1681276, is referred to here as "Credible."Buying a home is a big financial step, particularly if you’re seeking a $200,000 mortgage, so you’ll want to understand all the costs involved before you seriously start your home search.
Besides paying the home loan and the interest, you’ll have other costs that determine how much you’ll pay each month. Once you know your approximate monthly payment, you can determine how much house you can afford.
What are the costs associated with a $200,000 mortgage?
Several factors affect your monthly payment on a $200,000 mortgage. You’ll need to pay back the principal, of course, which in this case is $200,000. But you’ll also need to pay back interest on the loan.
How much interest you’ll pay varies depending on the interest rate you get and your loan terms. Your interest rate is largely determined by your credit score and the lender you choose.
If your down payment is less than 20% of the price of the home, you’ll have to buy PMI, which stands for private mortgage insurance and typically ranges between 0.5% and 1.5% of your mortgage. Usually, PMI is rolled into the mortgage payment. You’ll also pay into an escrow account, which covers your homeowners insurance premium and property taxes.
- Principal: The amount you borrow that needs to be paid back.
- Interest: The amount your lender charges you to borrow the money.
- Escrow: An account you pay into each month that’s added to your mortgage payment and used by the lender to pay your homeowners insurance and property taxes.
- PMI: Your mortgage payment will also include your private mortgage insurance. Note that you can stop paying PMI as soon as you eclipse 20% equity in your home.
Another factor that determines how much you’ll pay each month for your mortgage is the type of mortgage you have. You might pay more per month but less overall for a 15-year mortgage versus a 30-year mortgage, for example. Let’s see how this works.
For this example, we’re going to say you could get a 30-year, fixed-rate mortgage at 7.5% and a 15-year, fixed-rate mortgage at 6.5%. (For both scenarios, we’re also assuming a $200,000 mortgage, a $20,000 down payment (9% of a $220,000 property), and PMI of 0.5% of the loan amount, plus property taxes of $2,400 per year and homeowner’s insurance of $1,000 annually.)
| 30-year loan | 15-year loan | |
|---|---|---|
| Interest rate | 7.5% | 6.5% |
| Monthly mortgage payment | $1,765 | $2,109 |
| With no PMI (after 112 payments) | $1,682 | $2,026 |
| Total paid for home after 360 payments (30 years) | $614,768 | $367,349 |
How does a down payment affect my monthly mortgage payments?
Most lenders require you to put down some of your own money before they’ll lend you money to buy a home. The size of your down payment affects your monthly payments.
Using the above example, if you put down $20,000 on a $220,000 home (about 9%), and you took out a 30-year, $200,000 mortgage at a 7.5% interest rate, your monthly payment would be $1,765. But if you put down $44,000 (20%), all other factors remaining the same, your monthly payment would be $1,514.
What is private mortgage insurance?
You don’t need to pay PMI if your down payment is 20% or more of the home’s price. If you don’t have that much saved, many lenders will allow you to put down as little as 5%. You’ll pay more per month, though.
Using the same example (above), 5% of $220,000 is $11,000. If you put down $11,000, your monthly payment would be $1,832.
The good news is you can cancel your PMI as soon as you establish 20% equity in your home. You need to ask your mortgage lender to cancel it, but if you don’t notify them, your PMI will automatically cancel when you reach 22% equity.
Where to get a $200,000 mortgage
You can get a $200,000 mortgage from a large commercial bank, thrift bank (a small local bank), credit union, or a mortgage loan company. You can also go through a broker who finds the lender with the best terms for you.
How to apply for a mortgage
Applying for a mortgage isn’t difficult, but there is a process. Follow these seven steps to make it as seamless as possible.
Additional considerations before applying for a mortgage
The big takeaway is that making the leap from paying rent to taking on a mortgage isn’t an apples-to-apples comparison. Mortgages come with additional costs. Before you close, be aware of how much you’ll need to cover all the expenses of homeownership, such as your down payment, closing costs, monthly mortgage payments, and the total interest charged over the life of the loan.
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