Skip to main content
Advertiser Disclosure
We do receive compensation from some partners whose offers appear on this page. We have not reviewed all available products or offers. Compensation may impact the order in which offers appear on page, but our editorial opinions and ratings are not influenced by compensation.

Ascent-logo

  • Credit Cards
  • Banking
  • Brokerages
  • Loans
  • Mortgages
  • Knowledge
  • Latest Picks
  • Search Icon Click here to search

Credit Cards

Top Picks
  • Best of March 2021
  • Cash Back
  • Balance Transfer
  • Travel
  • 0% APR
  • Rewards
  • Bad Credit
Knowledge
  • Beginners Guide to Credit Cards
  • How to Rebuild Your Credit
  • Maximize Your Credit Card Rewards
  • Learn More About Credit Cards
Credit Card Tools
  • Compare Cards
Looking for a new credit card?

Explore the best credit cards in every category as of March 2021.

Get started!

Banking

Top Picks
  • Best Savings Accounts
  • Best Bank Accounts
  • Best Money Market Accounts
  • Best CDs
  • Best Checking Account Bonuses
Knowledge
  • Beginners Guide to Banking
  • Everything You Need to Know About Savings
  • Money Market Accounts Made Easy
  • Learn More About Banking
Looking for a place to park your cash?

Check out our top picks of the best online savings accounts for March 2021.

Get Started!

Brokerages

Top Picks
  • Best Brokers of March 2021
  • Best Online Brokers for Beginners
  • Best Options Brokers
  • Best IRA Accounts
  • Best Roth IRA Accounts
  • Best Robo Advisors
Knowledge
  • How to Open a Brokerage Account
  • Beginner's Guide to Brokerages
  • Learn More About Brokerage
Just getting started?

Explore our picks of the best brokerage accounts for beginners for March 2021.

Get Started!

Loans

Top Picks
  • Best Loans of March 2021
  • Best Personal Loans for Bad Credit
  • Best Loans for Debt Consolidation
  • Best Low-Interest Personal Loans
  • Best Personal Loans for Good Credit
  • Best Personal Loans for Fair Credit
Knowledge
  • Personal Loans Made Easy
  • Debt Consolidation Guide
  • How to Pay Off Debt
  • Learn More About Loans
Thinking about taking out a loan?

Before you apply for a personal loan, here's what you need to know.

Get Started!

Mortgages

Top Picks
  • Best Mortgage Lenders of March 2021
  • Best Mortgage Lenders for Poor Credit
  • Best Refinance Lenders
  • Best VA Mortgage Lenders
Knowledge
  • First Time Homebuyers Guide
  • Home Loans Made Easy
  • The Complete Guide to Refinancing
  • How to Get a Mortgage with Bad Credit
  • Learn More About Mortgages
Tools & Calculators
  • Mortgage Calculator
Compare Rates
  • Today's Mortgage Rates
  • Refinance Rates
  • 15-Year Mortgage Rates
  • 20-Year Mortgage Rates
  • 30-Year Mortgage Rates
  • Jumbo Mortgage Rates
  • VA Loan Rates
  • 5/1 ARM Rates
  • 7/1 ARM Rates
  • FHA Mortgage Rates

Knowledge

Knowledge Section
  • All Articles
  • Credit Card Articles
  • Banking Articles
  • Brokerage Articles
  • Personal Loan Articles
  • Mortgage Articles
  • Personal Finance Articles
Recent Articles
  • Senate Cuts Weekly Unemployment Boost in Stimulus Bill

    Personal Finance

    Senate Cuts Weekly Unemployment Boost in Stimulus Bill
  • Personal Finance

  • The Sad Reason U.S. Wages Are Up

    Personal Finance

    The Sad Reason U.S. Wages Are Up
  • 3 Expenses You Probably Didn’t Know You Could Charge on a Credit Card

    Credit Cards

    3 Expenses You Probably Didn’t Know You Could Charge on a Credit Card
  • The Ascent
  • Knowledge
  • Mortgages

Homeowners Are Borrowing More Than Ever as the Average Mortgage Climbs to New Highs

by Christy Bieber | Feb. 9, 2021

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

money bag, house, and jar of coins

Image source: Getty Images

Why is the size of mortgage loans climbing?

Americans are borrowing more money to buy homes. In fact, according to recent data from the Mortgage Bankers Association (MBA), the average purchase loan amount has hit a new record high.

There are a few reasons borrowers are taking out larger mortgage loans. If you're considering joining them, be cautious about how much you borrow. You don't want to get in over your head with this major financial obligation.

Why are borrowers taking out larger mortgage loans?

The MBA recently reported the average home loan for a new purchase hit a new record high of $395,200. Loan amounts have slowly climbed towards this record since April 2020.

There are two big reasons home loan amounts have gone up so much. The first is home prices have risen across the country. More people want to buy homes during the pandemic while fewer sellers are listing their properties. This has resulted in increased demand that coincides with lower supply. Obviously, this has driven prices up and created a seller's market. And when homes cost more, people have to borrow more to buy them.

Get $150 off closing costs with Better.com Mortgage

Get $150 off closing costs with Better.com Mortgage

This is one of the top lenders we've used personally to secure big savings. No commissions, no origination fee, low rates. Get a loan estimate instantly and $150 off closing costs.

Learn More

The other big reason for the loan increase is that mortgage interest rates have fallen dramatically in recent months, repeatedly hitting record lows. Rates have been driven down by the Federal Reserve's bond buying spree as the central bank has been purchasing billions of dollars in mortgage bonds per month. Since interest rates are lower, monthly payments are lower -- even with higher loan balances. This makes it easier for would-be borrowers to get approved for bigger loans.

Be careful about taking out a large mortgage

It's natural to want to take advantage of today's unprecedented low mortgage rates and secure a home loan ASAP. But it's worth making sure of two things.

First, you don't want to overpay for a home. Obviously, you can't time the market, and no one knows if home prices will go up or down. But you still don't want to pay an unreasonable price for a property just because there aren't many for sale right now.

You also want to make sure you're comfortable with the amount of mortgage debt you're taking on. You need to consider both the monthly payment and total borrowing costs to confirm that you feel good about the amount you borrow.

It can be tempting to let the bank determine the size of your loan, but they'll lend you as much as possible based on your financial situation. The bank doesn't have a clear idea of what else you may want to do with your money, such as retiring early. They won't take all of these goals into account when assessing what's actually affordable.

Your home loan should make sense for you

The bottom line is, it may make sense to take out a mortgage and you may need to up the amount you borrow because home prices have climbed. But you shouldn't take out a loan of any size unless you're sure you're making a smart financial choice.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase. 

Our expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See our full advertiser disclosure here.

About the Author

Christy Bieber
Christy Bieber icon-button-linkedin-2x

Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.

Share This Page
Facebook Icon This icon shares the page you are on via Facebook
Blue Twitter Icon Share this website with Twitter
LinkedIn Icon This image links to share the page over LinkedIn.
Email Icon Share this website with email

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

Related Articles

"Rates" on a stick note on a house image for Find the Best Mortgage Rates

Find the Best Mortgage Rates

Cardboard cutout house on a desk image for Best Mortgage Lenders for 2021

Best Mortgage Lenders for 2021

Money bags and a model house sit on a balance beam image for Best Mortgage Refinance Lenders for 2021

Best Mortgage Refinance Lenders for 2021

Change on a desk image for Mortgage Payment Calculator

Mortgage Payment Calculator

Featured Articles

Find the Best Mortgage Rates

Best Mortgage Lenders for 2021

Best Mortgage Refinance Lenders for 2021

Mortgage Payment Calculator


The Ascent Logo

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

btn_facebook-yellow btn_twitter-yellow btn_instagram-yellow

Copyright © 2018 - 2021 The Ascent. All rights reserved.

About The Ascent
About Us Contact Us Newsroom How We Make Money Editorial Integrity Ratings Methodology
Legal
Terms of Use Privacy Policy Accessibility Policy Terms and Conditions Copyright, Trademark and Patent Information
Learn
Credit Cards Banking Brokerage Loans Recent Articles

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Back to The Motley Fool