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The total cost of a $300,000 mortgage depends on several factors, including your interest rate, down payment amount, and loan term. (iStock)
The median home pricehas been over $300,000 for the past five years, according to Federal Reserve data. If you’re looking for a $300,000 mortgage, how much buying power that amount will give you depends on several factors, including where you’re buying, your credit and the interest rate you receive.
Here’s how to get a $300,000 mortgage and what to know about what your monthly mortgage payment could look like.
What’s the monthly payment on a $300,000 mortgage?
The answer to this question depends on several variables. When calculating your monthly mortgage payment, you have to factor in your interest rate, home price, loan term, down payment amount, and whether you need to pay private mortgage insurance, or PMI.
For example, a lower interest rate or higher down payment could lower your monthly payment. But if you take out a larger loan or receive a higher interest rate, this could increase your monthly note.
Manually estimating your monthly mortgage payment involves some complex calculations. But you can also use a mortgage payment calculator to easily get an idea of how much your monthly payment might be on a $300,000 mortgage. Here are two examples.
30-year mortgage example
Say you wanted to take out a 30-year, $300,000 mortgage with a 3% annual percentage rate, or APR. Plug the information into your mortgage calculator, and you’ll see that your estimated monthly mortgage payment will be $1,265. You’ll pay more than $155,000 in interest over the life of the loan.
A 30-year mortgage is the most popular option because it typically gives you the lowest monthly payment. But the downside is that you’ll pay more interest over the life of the loan.
10-year mortgage example
If you decided to take out a 10-year, $300,000 mortgage with a 2% APR instead, you’ll have an estimated monthly payment of $2,760, and will pay about $31,000 in interest over the repayment term. Your estimated monthly payments will be higher than with the 30-year term, but you’ll save more than $100,000 in interest.
Shorter repayment terms generally come with lower interest rates.
Keep in mind, these examples don’t factor in additional expenses, such as your closing costs or down payment amounts.
You can learn more about your mortgage options, and compare rates from multiple lenders, with Credible.
What are the parts of a mortgage payment?
A mortgage payment includes principal and interest, and sometimes additional costs are rolled into the loan.
- Principal balance — This is the amount you originally borrowed; a portion of your mortgage payment is applied directly to your outstanding loan balance. As you pay down your loan over years, the amount of your payment that goes toward the principal increases.
- Interest — This is the amount a lender charges you for borrowing money. Your interest rate and loan term determine how much you’ll pay over the life of the loan. In the early years of your mortgage, a larger portion of your payment will go toward paying interest.
- Escrow costs — If you choose to use an escrow account or your lender requires it, your property taxes and insurance premiums (such as homeowner’s insurance or mortgage insurance) will be included in your mortgage payment.
What is PMI?
Private mortgage insurance, or PMI, is usually required if you take out a conventional loan (one that’s not backed by the government) with a down payment that’s less than 20%. This type of insurance protects a lender in case you’re unable to repay your loan.
The amount you pay is based on a percentage of your loan and is added to your mortgage payment, paid upfront, or a combination of both options.
How much interest will I pay on a $300,000 mortgage?
Your interest rate and loan term have a huge impact on how much interest you’ll pay over the life of a mortgage.
To calculate the interest you’ll pay over the life of the loan, follow these two easy steps.
- Calculate the total cost of the loan by multiplying your total monthly payments by the total number of months.
- Subtract the principal balance from the total cost of the loan.
Here are some examples that demonstrate this.
- 30-year, $300,000 loan at 3% interest — In this example, your monthly payment is $1,265. To find the total cost of the loan, multiply that number by 360 (12 x loan term) to get $455,400. Then, subtract the principal amount of $300,000 from $455,400.
Total amount of interest paid: Around $155,400
- 15-year, $300,000 loan at 2.75% interest — For this example, you have to account for the shorter loan term — the monthly payment is $2,036. First, multiply the monthly payment of $2,036 by 180 (15 x 12) to get $366,480. Next, subtract $300,000 from $366,480.
Total amount of interest: Around $66,480
- 10-year, $300,000 loan at 2% interest — Based on this scenario, your monthly payment would be $2,760. To find the total number of multiple payments, multiply 12 by 10 to get 120. Then, multiply 120 by $2,760 for a result of $331,200.
Total amount of interest: Around $31,200
You can seethat the shorter your loan term is, the lower your total interest costs will be. Conversely, having a longer loan term usually means you’ll pay a higher amount of interest over the life of the loan. Which loan term you choose will depend on your priorities and budget. If it’s more important to you to have the lowest possible monthly payment, you’ll want to opt for a longer term. If paying the least amount of interest is your priority, a shorter term will make more sense.
How to get a $300,000 mortgage
These nine steps can help you get a $300,000 mortgage and buy a home.
- Set your budget. First, review your monthly income, expenses, and debt to see how much you can afford to spend on a down payment, closing costs, monthly mortgage payment, mortgage insurance, and any homeowners association fees. If you need help, consider using a mortgage affordability calculator.
- Check your credit. Your credit history and credit score are key factors lenders consider to determine whether you qualify for a mortgage. And if you qualify, your credit helps determine your loan amount and interest rate. To get the best deal possible, check your credit report for errors and look for ways to improve your score (like paying down other debts) before applying.
- Get pre-approved. Before you find a home, it’s a good idea to get a pre-approval letter for a loan from several lenders. This letter gives you an estimate of how much you may qualify to borrow and shows sellers (and real estate agents) you’re a serious buyer.
- Compare mortgage rates and offers. Comparison shopping for a mortgage can help ensure you get the best deal available to you. Be sure to compare key factors, such as fees, APRs, closing costs, and mortgage insurance.
- Search for and make an offer on a home. When you find the home you’re looking for, place an offer on it based on comparable homes in the area. Hire a real estate agent in your area if you need help.
- Apply for a mortgage. If your offer is accepted, complete and submit your lender’s mortgage application. Be prepared to submit important documents, such as W-2 forms, bank statements, tax returns, and more.
- Wait for approval. A lender will review your documents and information to determine if you’re eligible. If you meet its eligibility requirements, an appraisal will be done to determine how much the home is worth.
- Do the final walkthrough and prepare for closing. Do a final walkthrough of the home to make sure it’s ready to move in. Next, prepare for closing by reviewing the paperwork you’ll sign, if available. Also, be sure to shop around for homeowners insurance as some lenders will require proof of it before funding your loan.
- Close on your loan. Attend the closing meeting, sign the required paperwork, and transfer funds for your down payment and closing costs to receive the keys to your brand new home!
Credible makes it easy to compare rates from multiple lenders and find the best mortgage lender for your needs.
Where to get a $300,000 mortgage
You can get a $300,000 mortgage from a variety of places, including banks, credit unions, and online lenders. Each option comes with pros and cons. For example, if you apply for a mortgage with a bank you already have an account with, you may qualify for a discount on your interest rate or closing costs. But the bank could have stricter lending standards than government-backed loan programs.
If you choose to apply with a credit union, you may get a good deal since they’re member-owned, not-for-profit institutions. To apply for a mortgage from a credit union, however, you must be a member — and you’ll need to meet membership criteria.
Finally, you may qualify for a lower mortgage rate with an online lender versus a traditional bank because they have lower overhead costs. But if you prefer face-to-face customer service, this won’t be your best option.
Before you make a decision, research and compare loan offers from multiple lenders to find the best deal for your unique financial situation.
