If you think that this is the year to purchase that new home, chances are you’re wondering whether that mortgage payment will fit into your budget. Many factors go into determining what your payment will look like at the end of the day, including the cost of the home, your interest rate, local taxes, and home insurance monthly cost. Understanding that variance, here’s the breakdown of the average American’s monthly mortgage:
What is the average American’s monthly mortgage?
The median monthly housing cost for owner-occupied properties with a mortgage, based on the latest data from the U.S. Census Bureau, is $1,609 per month. The U.S. Census Bureau’s latest American Community Survey uses the median monthly housing cost to show what the average American homeowner can expect to pay. The best representation of the average house payment isn’t the average at all.
That’s because, when averaging mortgage payments, expensive homes tend to inflate the numbers so that it looks like most American homeowners are paying more than they actually are for housing.
Using the median value — the monthly mortgage payment in the exact center of the market — provides a more accurate view of what you can expect to pay. That’s how much the average American homeowner can expect to pay per month for housing. This obviously varies based on one’s location and property type, but it’s an important initial reference point to help homebuyers evaluate the cost of their potential purchase.
To show how monthly mortgage payments cluster around this median value, here’s a breakdown of the percentage of homeowners within each payment range:
|Monthly Mortgage Payment||Percentage of Homeowners|
|Less than $599||2.8%|
|$600 to $999||15.4%|
|$1,000 to $1,499||26.8%|
|$1,500 to $1,999||20.9%|
|$2,000 to $2,499||13.2%|
|$2,500 to $2,999||8.1%|
|$3,000 or more||12.9%|
How location affects mortgage payments
Location affects housing inventory and property values, which in turn affects mortgage payments. Coastal cities and metropolitan centers are especially prone to higher home values due to their limited space and high demand. New York, California, New Jersey, Massachusetts, Hawaii, Connecticut, and California all have average monthly housing costs for mortgaged properties that reach over $2,000.
In the Southeast and Midwest, where there’s more space and fewer population centers, average monthly mortgages are often just over $1,000. Accessible housing is reason enough for many people to relocate, and it might just be that the perfect house for your budget is in another area code.
Monthly mortgage payment based on age
Buyers in the 22-54 age range usually have larger mortgage payments for several reasons. Younger buyers tend to have fewer savings, which means they put less money down upon purchasing a home. About half of buyers aged 22-39 put less than 10% down on their homes; while half of homeowners between the ages of 65-73 submitted a down payment of at least 25%.
This leads to larger monthly mortgage payments for younger generations. Younger and middle-aged buyers also tend to buy larger, more expensive homes for their families, which drives up their average mortgage payment.
Older buyers generally purchase smaller homes, offer larger down payments, and are less concerned about the investment potential of their property. All of these factors contribute to relatively lower mortgages for home buyers over the age of 54. For example, while members of Gen X (ages 40-55) have a medium mortgage of $2,206, Baby Boomers enjoy a medium monthly payment of only $1,739.
Breaking down the average monthly mortgage payment
A loan’s principal is the base amount you borrow from a lender to cover what’s left after your down payment. Lenders make money by charging interest on that principal, which you’ll pay off as you make monthly mortgage payments. These two elements — the principal and the interest— usually command the largest chunk of your mortgage payment. The following chart illustrates how that chunk of the monthly mortgage correlates with home value and down payment.
Monthly mortgage payment
*Homeowners Insurance and Property Taxes not included
|Home Price||10% Down Payment||20% Down Payment|
*All values computed based on a 3.99% interest rate on a 30-year fixed-rate mortgage.
Many first-time home buyers are under the impression that principal and interest are the only elements of a mortgage. However, many monthly mortgage payments aren’t complete until they include property taxes.
Property tax rates vary widely based on location, which means you’ll have to research what you’ll be expected to pay. For example, many states in the Northeast have effective tax rates over 2%, while some states in the Southeast offer rates well below 1%. This percentage may not seem like a huge disparity, but it adds up, especially since many areas with the highest property values also have the highest property tax rates.
Homeowners insurance is another aspect of housing costs that depends heavily upon location and home values. Nationally, the average annual cost of homeowners insurance is around $1,211 but states that face many natural disasters often require much more. Louisiana, for instance, can attribute its average annual homeowners insurance premium of around $2,000 — the highest in the country — to its relatively high risk of hurricanes. Wherever you live, though, homeowners insurance is still a necessity. Together with principal, interest, and property tax payments, it forms the basic portfolio of housing costs.
All of the above figures change regularly, some of them daily. So while the average mortgage in the United States is about $1,600, your situation will almost certainly be different given your location, the size of your loan and the interest rate you’re able to get. Stay up to date on all of the latest facts, figures, and tips or use our handy refinance calculator to get a better idea of what your mortgage will end up being today.
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