Here's How Much Mortgage Interest the Average American Pays Each Year

If you buy a house, chances are good you're going to need to take out a mortgage to do it. Many homeowners currently have mortgages and, as a result, they are paying interest on their home loans to the bank every month for the privilege of being able to borrow money for their property.

If you aren't sure how much mortgage interest is normal, it can be helpful to look at this data from the Bureau of Labor Statistics showing how much other homeowners are paying for their own mortgage loans.

Here's what people are paying in mortgage interest

According to the Bureau of Labor Statistics, the mean amount of mortgage interest and charges in 2021 was $2,781 among all consumer units.

Some demographic groups pay much more mortgage interest than others, though. For example, the mean mortgage interest of those making under $15,000 was just $641, while the mean interest paid by those with incomes above $200,000 was $8,393.

Obviously, interest expenses go up as income does, both because more people within a higher income bracket are likely to own houses and because people with higher incomes tend to buy more expensive houses that come with higher mortgage costs.

How big of a mortgage loan can you afford?

While knowing the typical mortgage interest costs is helpful to get an idea of what people are paying to be able to borrow to buy a home, it's ultimately important for each would-be buyer to assess on their own just how much they can afford.

In general, it's best to keep housing costs below 25% of your income. This includes not just mortgage interest, but also the principal payments you're making on your loan as well as taxes and homeowners insurance. By keeping total expenditures below 25%, you can avoid sinking so much money into monthly mortgage payments that you struggle to save for retirement or fulfill other financial goals.

The size of your down payment and your other financial goals are also going to affect how much house you can buy as well. You will need to put at least 3% down to get most loans, but ideally you'll put down closer to 10% or even 20%.

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The more money you put down, the lower your monthly payments will be, the more home equity you start with, and the more easily you'll be able to qualify for a loan at a competitive rate since the mortgage lender takes on less risk. If you put down at least 20%, you can also avoid being required to pay for private mortgage insurance that protects the lender in case of foreclosure.

By thinking about your down payment and the amount you can spend as a percentage of income, you can work backward from there to see how much house you can afford. You can also look at the total cost of your home loan, including interest expenses, and be sure you're comfortable taking on such a large obligation in light of your other financial goals and plans.