How Much Would the Monthly Payments Be on a Million-Dollar Home?

A million-dollar home may seem either incredibly extravagant or par for the course, depending on where you live. While it's well above the average home sale price, 7.1% of U.S. homes are worth $1 million or more, according to Redfin.

If you're in an area with a high cost of living, spending this much could be the only way to buy a quality home. Let's break down what the monthly mortgage payments might look like if you bought a piece of $1 million real estate, as well as what a typical lender will require.

What you need to know about mortgages for $1 million homes

Whether you're buying a $1 million home or a cheaper slice of real estate, your monthly mortgage payment is determined by how much you borrow for your home loan, your interest rate, property taxes, and homeowners insurance.

Other factors affect your mortgage payments. If you make a larger down payment, you'll have a lower principal loan amount, which means you'll pay less each month. A shorter loan term means higher mortgage payments, but you'll build equity faster. Buying discount points can also lower your interest rate. In addition, it's important to consider whether you have a fixed rate or an adjustable rate on your mortgage, as an adjustable rate will change based on the current market.

While HOA fees usually aren't included in your mortgage payment, it's essential to factor them into your housing costs. If HOA fees are high, you may need to shop for a property with a lower home price.

In most cases, you'd need to take out a jumbo loan to buy a $1 million home. A jumbo loan exceeds the limits set by government-sponsored agencies, while regular, conforming loans do not. As of 2023, a mortgage loan with a principal balance that exceeds $726,200 for a single-family home is a jumbo loan. However, in high-cost areas, a jumbo loan is a home loan exceeding $1,089,300.

Jumbo loans can be harder for a buyer to qualify for than conforming loans, and jumbo mortgage rates are often higher. Plus, most jumbo lenders require at least a 20% down payment. So if you bought a $1 million home, you'd probably take out a mortgage for around $800,000 and put at least $200,000 down. If your lender allows you to put down less than 20% on your mortgage loan, you'll also need to account for the cost of private mortgage insurance, or PMI.

Here's what monthly payments might look like on a $1 million home

Let's assume you have your $200,000 down payment and you qualify for a jumbo loan for the remaining $800,000. You're ready to buy your million-dollar place.

You'd need to get a personalized mortgage rate quote from lenders, as different borrowers qualify for different interest rates. But these examples can give you a good idea of what you'd end up paying per month for a million dollar home mortgage.

Don't forget, your mortgage principal and interest aren't the only payments you need to make. Be sure to account for property taxes and homeowners insurance in your mortgage calculations. These can vary dramatically depending on where you live. Here are some approximate monthly payments for a 30-year or 15-year mortgage.

Data source: Estimates using The Ascent's mortgage calculator.

You'd need to cover about $80,592 a year, just in housing costs alone, to pay for a 30-year mortgage in our example. Since research from The Ascent found that the median household income in the United States was $69,717 as of 2021, a $1 million home is well out of reach for most people.

Can you afford a $1 million home?

If you're considering buying a $1 million home, you'll want to make sure you can comfortably make those monthly payments. Ideally, that means your total housing costs will be well below 28% of your income. Lenders like to see that your housing costs don't exceed this threshold.

You should also be aware that other expenses of home ownership, such as utilities and maintenance, are typically higher with a more expensive home. So be sure to take these expenditures into account when you decide if you can afford a mortgage on a million dollar house.

Finally, consider your other financial goals and your ability to cover those large payments in an emergency. Consider whether paying so much for a house will make it more difficult to accomplish other things you dream of, such as early retirement or saving for a vacation. And make sure you have enough savings in an emergency fund to see you through a job loss or other unexpected event. If you don't, you may want to scale down your expectations and choose a lower-priced home.

On the other hand, perhaps you can come up with the requisite down payment and closing costs, easily cover your monthly mortgage payments, and still meet your financial goals. As long as you can easily save up enough in an emergency fund to cover three to six months of living expenses -- including your new mortgage payment -- and you have an excellent credit score, then you're in a good position to move forward. You can go ahead and purchase that $1 million property you've been dreaming of.

Still have questions?

Here are some other questions we've answered:

• How to Create a First-Time Homeowners' Budget
• Down Payments: What They Are & How They Work
• What Is a Jumbo Loan?