Average Mortgage Payment – A Complete Analysis

19.10.2021
Milena

In the United States, the total mortgage debt stands at  $10.44 trillion in the second quarter of 2021. This debt is repaid via monthly installments that vary depending on various factors. According to one source, the average mortgage payment in the country hovers around $1,275 per month on a 30-year fixed mortgage, and $1,751/month for a 15-year term. Yet, consumers from different states, age groups, and income groups earmark different shares of their earnings for mortgage payments. In any case, the mortgage remains a serious issue for Americans. If you want to learn how this segment varies and what affects it, read our average monthly house payment analysis.

Mortgage Payments in the US

A mortgage represents the highest debt in the United States. Did you know that the average mortgage debt in 2020 was over $215,000? With debt so high, it makes sense that the national average mortgage payment puts a considerable strain on Americans’ bank accounts.

Census Bureau data shows that in 2020, the median monthly owner costs without a mortgage were $490. Adding mortgage costs into the calculations boosts the amount to $1,558. Basically, the median mortgage costs in the country in 2020 were $1,068.

It shouldn’t go unnoticed that the average payment is contingent on many factors. For example, Americans pay $906 a month for a mortgage on a 30-year fixed-rate loan with a rate of 3.29%. The average mortgage payment is $1,295 per month on a 15-year fixed-rate loan at 2.79%. Naturally, the loan size plays a role here too. If two people apply for the same duration and loan rate but a different amount, their house payments will differ.

We also can’t overlook the down payment either as it also affects the payment size. The typical mortgage down payment in the US is about 6%.

Average House Payment by Year

CoreLogic data points to a decline in the average payment on a 30-year fixed-rate mortgage. From 2006 to 2020, the fall was 29.78%, and from 2018 to 2020, the decline was 5.44%. Between 2019 and 2020, the average monthly house payments improved by 0.78%.

Take a look at this breakdown of the average US mortgage payment by year:

It’s essential to mention that the average payment depends on the rate, down payment, and home value. Below, we’ll go over some examples to better clarify the concept.

In California, the average property value is $652,175. The typical down payment is about 20% in this state, while the rate is 3.29%. Under these circumstances, the average mortgage payment in California would be $2,813. In Nebraska, the average home value is $193,062. With a typical 20% down payment and a 30-year loan, the state’s average payment would be only $877.

Mortgage Payments by State

Our guide for the best places to invest in real estate has already established how the US’s average home price varies. DC, California, and Massachusetts, for instance, are the states where the median house value is the highest. Hence, it makes sense that these destinations will have an average mortgage payment by state.

In the table below, we will analyze the mortgage payments in all American states. However, please note that the data focuses on the median monthly mortgage payment as the Census Bureau provides those details only. The logic is that median amounts give a better representation since average amounts are heavily impacted by the lowest and highest figures and aren’t always a relevant source of information.

Still, you can expect both the average and the median mortgage payments to be similar. For example, the average mortgage payment in NJ is undoubtedly the highest by state, just like the median one.

When it comes to the highest median and average monthly mortgage payment by state, New Jersey, Hawaii, and California top the list. Homeowners in these states pay about $2,439, $2,350, and $2,282 a month for mortgage. Two other US states whose residents have soaring mortgage payments are Massachusetts and New York. Here, the median house payments are $2,165 and 2,114.

Around the middle come Pennsylvania, Florida, and Wisconsin. Homeowners in these destinations pay median house monthly payments of respective $1,474, $1,466, and $1,418. Again, it’s important to note that the average payment in any of these states will differ from the median. For example, the average mortgage payment in PA is $948 on a 30-year fixed rate of 2.5%.

Citizens of West Virginia, Arkansas, and Indiana pay the lowest median house payment – $1,023, $1,071, and $1,130, respectively. Mississippi and Alabama also belong in this company with their median payments of $1,134 and $1,147.

Mortgage Payments by US Region

In the table below, let’s see how the average house payments move in different US areas. It’s obvious the Pacific deals with the highest average American mortgage payment. Homeowners from this region pay an average of $2,096, followed by New England residents with an average of $1,912.

Americans living in the East South Central region, by contrast, pay the lowest average payment for a mortgage of $1,140. The difference between the region with the highest and the lowest house payment is significant at $956.

Mortgage Payments by City

The average mortgage payment varies by state and even by city. Below, you can find the destinations with the highest house payments.

Cities with the highest average house payments per month:

  • San Jose, CA – $4,008
  • San Francisco, CA – $2,994
  • Vineyard Haven, MA – $2,963
  • Santa Cruz, CA – $2,940
  • Edwards, CO – $2,488

Cities with the lowest average house payment:

  • Coffeyville, KS – $205
  • Newport, TN – $259
  • Union City, TN – $283
  • Rockingham, NC – $294
  • Martin, TN – $296

We also want to mention the average mortgage in Los Angeles, California. This state’s homeowners pay about $3,048 a month and need an income of nearly $122,000 to afford a home. This isn’t all that surprising, considering that the city’s average home price is about $622,500.

Average House Payment by Balance Owed

Average house payments vary by balance owed, and even the monthly payments for the same amount can differ. The mortgage term and the interest rate are the most decisive factor. Let’s analyze the average mortgage payment on 100k under different terms.

Average Mortgage Payment on 100k Under Different Terms

While the table focuses on 100k mortgages, the same variations apply to the average mortgage payment on 500k. The takeaway, in any case, is that the average payment can vary remarkably. For instance, the difference between a 15-year mortgage with an interest of 3% and one with a 5.50% rate is $126.5 a month.

Mortgage Payments by Income

Just like the average mortgage payment in Utah is different from payments elsewhere, this segment varies by income, as well. According to the data provided by the US Census Bureau, Americans making the most money have the highest average house payments per month. People from this income group, interestingly, don’t have the highest median interest rate.

The highest mortgage interest rates are reserved for Americans making between $10,000 and $39,999. Those from the $10,000-19,999 income group are among the consumers paying the highest interest rate. Yet, they boast the lowest typical mortgage payment per month.

As you can see in the table above, households making $120,000 or more pay the highest median mortgage of about $1,600. Those making $10,000-19,999 meanwhile pay the lowest median mortgage payment per month of $607.

The difference between the highest and lowest median payments is an impressive $993. The first group gets better median rates of 4%, while the latter’s median mortgage rate is 5%.

Americans paying $607 a month on a mortgage spend $7,284 a year. That represents 72.84% of their annual income if they make $10,000. Those who have an average house payment per month of $1,600 a month have annual mortgage expenses of $19,200. This amount represents only 16% of their annual income if they make $120,000. These figures show that the average mortgage payment by income doesn’t quite capture the impact these payments have on households. Especially not unless you go a step further and see how much of a family’s total income goes on mortgage payments.

Mortgage Payments by Age

Americans in their prime owe the highest average mortgage debt, our stats show. So, it makes sense that this age group also deals with the highest average house payments too.

You can find the median payments rather than the typical monthly mortgage payment for each age group in the table below. Namely, the median amount gives a better picture, and hence the US Census Bureau provides these statistics instead.

As you can see in the table, Americans aged 35-55 pay the highest mortgage of $1,192. Homeowners aged 75+, by contrast, pay significantly lower monthly installments of $696. This age group also has the lowest average mortgage payment in the US.

The difference between the highest and the lowest cost is always interesting to analyze. In this category, it’s only $496 or much lower than the difference of payments by income. The only Americans whose median monthly payments are above $1,000 range from 30 to 54 years. These are some amusing trends we spotted analyzing the median and average monthly house payments by age.

What Affects Mortgage Payments?

Before even worrying about your average monthly mortgage payments, you should understand what affects this amount. Multiple factors are at play here. Some affect the mortgage rates you get and hence indirectly impact the payment size. Others, in contrast, are standard expenses that are typically calculated in the average monthly house payments.

Down Payment

A down payment is the initial lump sum you pay towards your home investment. The larger this amount is, the better for you in the long term. High down payments build trust between borrowers and mortgage lenders. Therefore, they often get customers better terms. The average mortgage down payment percentage in the US is about six. Future homeowners can buy a house with a lower and higher down payment. The second option, however, works in their favor.

Interest Rate

Interest rates are how lenders make money from customers. You pay monthly interest, which is a percentage of the amount you borrowed from the bank. Mortgage interest rates are usually fixed. This is another reason to try and make sure your down payment is equal to or greater than the average mortgage down payment. The more you invest, the less you need to borrow. Hence, the interest you pay every month will be lower, as well.

Credit Score

Borrowers with a better FICO rating are considered more trustworthy and have better creditworthiness. It’s important to know what is a good credit score and how to achieve it since it can get you better rates. 

If you’re not sure how to accomplish this yourself, you can always turn to the expertise of the best credit repair companies before applying for a mortgage. Finding a co-signer with a good credit rating is another step towards better mortgage rates and, therefore, lower payments.

Loan Size (Principal)

Your average monthly mortgage payment mostly depends on the principal or the amount you borrow. This is the amount of money you must pay, alongside the interest, to the lender. Depending on how large the mortgage is and how long the repayment period is, your payments can drastically vary. It makes sense that people buying a $500,000 house and those investing in a $100,000 home won’t have the same average house payment per month.

Property taxes

Your home’s property tax is typically included in the average mortgage payment per month in the United States. The taxes you pay depend on your state, property tax rate, and home value. So, expect a property assessor to visit you and settle this issue for you.

Insurance

Once you become a homeowner, you will need the services of the best homeowners insurance companies. These expenses also typically go into the calculations of your average monthly house payment.

Finally, let us explain how everything works for an average mortgage payment with taxes and insurance. Let’s say that the principal payment plus the interest you pay to the bank is $1,184. Add tax of $117 and insurance of $75 to get the total mortgage payment of $1,376.

The Takeaway

Your mortgage payment depends on multiple factors, most notably, the amount you borrow alongside your down payment and term length. Then, your location, credit score, and income also impact the mortgage rate you will get. Therefore, the US average mortgage payment may not be the appropriate factor for setting your expectations. Yet, it’s good to consider it before applying for a mortgage.

References: New York Fed, Census Bureau, Business Insider, CoreLogic, Boon Brokers, eChoice, CMHC, Finder

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