How Much Is a Monthly Mortgage Payment on a Million Dollar House?

Buying a home is part of the American Dream for many, and so is becoming a millionaire.

But, what if your dream is to own a house valued at $1 million? Unless you are very wealthy, you'd probably have to take out a mortgage to buy a lavish mansion with a seven-figure price tag. So, what would the mortgage payment look like if you did?

Here's what you'd pay each month for a $1 million home

If you want to buy a million-dollar house, you'd likely need to make a down payment. Very few mortgage lenders allow you to get approved for a loan without putting money down since there's a lot more risk if you have no skin in the game. And, it's even less likely a mortgage lender will offer you a loan to buy a $1 million house unless you put money down.

In fact, many lenders require you to make a pretty large down payment -- sometimes to the tune of 20% or 30% -- if you want to get approved to buy such a costly property. So, that would mean if you were hoping to purchase an expensive place like this, you'd need about $200,000 (or more) down.

If you made a $200,000 down payment, that would leave you borrowing $800,000. And the monthly mortgage payment on that $800,000 loan would vary depending on the interest rate you were offered, as well as what loan term you chose. For example:

• If you borrowed $800,000 on a 30-year fixed-rate loan at 8.00% interest, you would be looking at a monthly payment of $5,870 for principal and interest on your home loan.
• If you borrowed $800,000 on a 15-year fixed-rate loan at 6.50% interest, you would be looking at a monthly payment of $6,969. Your monthly payment is higher, even though your rate is lower, since you'd be cutting your repayment time in half.

With either of these options, there's no doubt you'd need to make a pretty generous income in order to afford a million-dollar property -- especially since you should aim to keep your housing costs to 25% of your take-home income or less.

Don't forget other costs of ownership

Your monthly mortgage payment probably would not just cover principal and interest. In fact, many lenders require you to also include extra money in your monthly mortgage payment to cover the costs of property taxes and homeowners insurance. Your lender will determine the amount you must pay each month to cover these costs and will collect the cash and keep it in an escrow account until the bill comes.

So, you'd also need to factor in these costs when determining how much you'd have to pay each month. These costs can vary a lot depending on where you live, local property tax rates, and the risk your house presents (a house in a flood zone, for example, might cost much more to insure).

Say, for example, your property taxes were $15,000 annually and your insurance was $2,000 -- both reasonable estimates for a million-dollar house. This would add an additional $1,417 to your monthly mortgage payment ($17,000 / 12). So, you could be looking at a total monthly payment of $7,287 for a 30-year fixed-rate mortgage at 8.00% interest once you add your escrow payments to the principal and interest cost.

You need to make sure you take all the monthly expenses of any home into account -- especially a million-dollar one -- when you decide if owning a particular property is right for you. If you worry about where the money to make the payments is going to come from, you shouldn't move forward with the home purchase.