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What are the monthly payments on a $400,000 mortgage?

Kat AokiNovember 12, 2025 at 11:03 PM

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What are the monthly payments on a $400,000 mortgage? (Maria Korneeva via Getty Images)

If you’re considering a $400,000 mortgage in today's market, it's important to understand the factors that influence your monthly mortgage payment. While the Federal Reserve's decisions and policies play a big role in what borrowers pay on mortgage rates, your monthly payment is influenced by more than just rates.

Additional factors — such as the loan term, repayment frequency, insurance costs, property taxes and potential private mortgage insurance (PMI) — all impact how much you’ll pay each month, as well as the total interest you’ll pay over the life of the loan. The good news? It’s still possible to lower your total mortgage cost by leveraging smart strategies.

We break down what you can expect to pay on a $400,000 mortgage at different rates and how much you need to earn to afford one — plus 10 tips for saving money on your next home loan.

Monthly payments on a $400,000 mortgage

Your estimated monthly payments on a $400,000 mortgage depend on the interest rate. Here’s what you can expect to pay based on a 30-year fixed-rate mortgage with good to excellent credit.

Interest rate

Mortgage term

Monthly repayment

6.00%

30 years

$2398.20

6.25%

30 years

$2,462.87

6.50%

30 years

$2,528.27

6.75%

30 years

$2,594.39

7.00%

30 years

$2,661.21

7.25%

30 years

$2,728.71

7.50%

30 years

$2,796.86

7.75%

30 years

$2,865.65

8.00%

30 years

$2,935.06

Note that these figures include principal and interest only. Your actual monthly payment will be higher after factoring in property taxes, homeowners insurance and PMI, if it applies to your loan.

🔍 Read more: How a 1% mortgage rate change matters more than you think

Where to get a $400,000 mortgage

Various financial institutions offer $400,000 mortgages. Here's what to expect from different lenders and which types of borrowers they may be best for.

Traditional banks

Large national banks like Chase, Wells Fargo, Citi, and U.S. Bank offer a wide array of mortgage products, including conventional and government-backed loan and first-time homebuyer programs. If you’re an existing bank customer, it may be worth asking if you qualify for loyalty discounts on mortgages.

For example, U.S. Bank offers existing customers a credit of up to $1,000 on closing costs on new first-time mortgages, and Citi offers discounts on your mortgage interest rate if you maintain a specific minimum balance in a Citi checking account. But shop around, as you may find lower rates elsewhere — even after you factor in discounts.

Credit unions

Unlike traditional banks, which are for-profit institutions, credit unions are nonprofit financial institutions owned by their members. Because they don’t work for shareholders, credit unions like Navy Federal Credit Union and PenFed Credit Union may offer more competitive rates than banks or online lenders, especially if you have a strong credit history and qualify for membership.

Credit unions may also have lower fees and more flexible lending criteria than traditional banks, making them a good choice if you’re looking for a personalized approach to your mortgage. Some also offer first-time homebuyer programs, which can help reduce your closing costs or down payment requirement, if you qualify.

Online lenders

Online lenders like SoFi and Rocket Mortgage are known for offering streamlined, fast-paced loan processing through user-friendly online platforms. While you might get a lower rate with a credit union or bank, online lenders may be a good choice for tech-savvy borrowers who need fast turnaround on their loan approval — which may be important if you’re shopping homes in a competitive housing market.

Mortgage brokers

If you have a unique financial circumstance or lack the time to compare lenders on your own, using a mortgage broker like Motto Mortgage could be a solution. Brokers have access to a broad network of lenders, helping you to find the most competitive rate for your situation. Brokers can be particularly useful if you’re a business owner, self-employed or interested in a specialized loan product, like a portfolio loan.

🔍 Read more: 4 popular mortgage loans for homebuyers: Conventional, FHA, VA and jumbo loans

How much do I need to earn to afford a $400,000 mortgage?

A common guideline in the mortgage industry is the 28% rule, which suggests that your total monthly mortgage payment shouldn't exceed 28% of your gross — or before-tax —monthly income. Let's use this rule to calculate the recommended income for a $400,000 mortgage.

Assuming a 30-year fixed-rate mortgage at 6.5% interest, including estimated property taxes and insurance, the payment on a $400,000 mortgage would be around $2,857 a month.

Using the 28% rule, we can calculate the recommended gross monthly income required for a loan of this size. To find this number, divide the monthly mortgage payment by 28% (or 0.28):

$2,857 / 0.28 🟰 $10,204 gross income per month

Based on this guideline, your household should aim for a monthly before-tax income of $10,204 — or an annual gross income of about $122,488 ($10,204 x 12) — to comfortably afford a $400,000 mortgage. Remember, this is a general recommendation only, and your individual circumstances may vary.

Loan terms: 30-year vs. 15-year terms

Shorter loan terms typically offer lower interest rates but result in higher monthly payments. Here's a comparison of different loan terms at various interest rates for a $400,000 mortgage.

Interest rate

30-year term — monthly payment

Total interest paid over the life of 30-year term

15-year term — monthly payment

Total interest paid over the life of 15-year term

5.00%

$2,147.29

$373,023

$3,163.17

$169,371

6.00%

$2,398.20

$463,353

$3,375.43

$207,577

7.00%

$2,661.21

$558,036

$3,595.31

$247,156

8.00%

$2,935.06

$656,621

$3,822.61

$288,070

While 15-year terms have significantly higher monthly payments, they result in substantial interest savings over the life of the loan.

What to consider before applying for a $400,000 mortgage

Before applying for a $400,000 mortgage, do your research to understand the total upfront and lifetime costs of your home loan against your homebuying budget.

Grasp the full financial picture

Before diving into a mortgage application, make sure you understand and account for the costs associated with a $400,000 loan, including:

Closing costs. Closing costs can set you back anywhere from 2% to 5% of the loan amount. Some types of loans — like Federal Housing Administration (FHA) loans — let you roll some of the closing costs into your loan balance, to save you paying all of them at closing.

Property taxes. Real estate taxes can vary significantly by location and often represent a substantial annual expense into the thousands of dollars. While property taxes are often rolled into your monthly payments, you can choose to pay them on your own, depending on your loan.

Homeowners insurance. The cost of insuring your home varies widely based on the property’s location, your home’s value and your desired coverage level. Average annual insurance costs can range from $999 to more than $1,600, according to nationwide insurer Progressive, with much steeper premiums in states that experience frequent natural disasters, like Florida and California.

Private mortgage insurance. If your down payment is less than 20% of your home’s purchase price, you may be on the hook for PMI (called MPI for FHA loans), which is designed to protect lenders against default. Costs vary based on your credit score, loan-to-value ratio and loan term, but can range from 0.5% to 2% of your loan amount annually.

Hidden costs. You’ll also want to budget for less obvious costs like home inspections, surveys, appraisal fees, title insurance and potential renovations or repairs needed before or shortly after you move in. Also, consider the cost of moving and furnishing your new home, which can run into the thousands.

Consider your loan’s lifetime cost

While a lower monthly payment might sound attractive today, it could cost you more in the long run. Be sure to calculate total costs over the life of the loan for different scenarios to make the right decision for your budget. The sooner you can pay off your mortgage — or the more frequently you make repayments — the more you’ll save in interest.

Understand the fine print

Although reading through terms and conditions can be tedious, it pays to understand the details of your mortgage — including possible prepayment penalties, mortgage rate locks, when variable rates may change, options for bi-montly payments, float-down options and the specific conditions under which your rate or terms might change before closing.

Look specifically for loan prepayment penalties, which are designed to discourage you from paying your loan early — and preventing your lender from collecting lucrative interest from you. Note that lenders are prevented by law from charging prepayment penalties on FHA, VA or USDA loans.

Consider the long-term implications

And last but not least, it’s important to think about:

How long you’ll stay in the home. Plan to stay in your new home for at least five to seven years. This will help to offset your closing costs and build equity.

Property value appreciation. Research historical trends in your area to get an idea of what your home could be worth in the future should you need to sell later.

Impact on other financial goals. Ensure your mortgage payment doesn't derail your retirement savings or other important objectives.

🔍 Read more: Mortgage rate locks: What they are, how they work — and why timing is everything

How to find and apply for a mortgage

Follow these general steps to get ready for, find and apply for a $400,000 mortgage:

Evaluate your financial health. Review your credit report for accuracy and work on improving your credit score. Calculate your debt-to-income (DTI) ratio, aiming to keep it under 36% for better loan terms. You can calculate your DTI by dividing your total monthly debts by your gross monthly income.

Set a realistic budget. Determine what you can comfortably afford for monthly mortgage payments. Factor in all homeownership costs, including taxes, home insurance, PMI and ongoing maintenance.

Explore different mortgage options. Mortgages come in many flavors, including conventional or government-backed, as well as fixed-rate or adjustable-rate. Ask your lender which is best for your financial situation and down payment needs.

Prepare your down payment. Decide on your down payment amount. While 20% is often recommended to avoid private mortgage insurance, there are options for lower down payments, including FHA, VA and USDA loans.

Compare multiple lenders. More than half of U.S. homebuyers didn’t shop around for their mortgage, according to a recent LendingTree survey. But this is a mistake. For the best deal, always compare multiple lenders, including banks, credit unions and online lenders, as rates and terms can vary widely by institution.

Obtain multiple quotes. Reach out to several lenders for quotes, analyzing both interest rates and associated fees. Ensure you're comparing similar loan products, and ask about any additional costs or points included in the quotes.

Secure preapprovals. Once you've narrowed down your lender options, go through the preapproval process for each one. You’ll need to submit initial financial documents for the preapproval, which will give you a clearer picture of your borrowing capacity.

Carefully read over your loan estimates. Review the loan estimates provided by the lenders and compare offers. Pay close attention to the terms, rates and fees. Ask for clarification on any unclear points.

Complete your desired application. After selecting a lender and agreeing to the terms, finalize your application with a formal application and a hard credit check. Be prepared to provide additional personal or financial details promptly, if needed.

Navigate the closing process. Once approved, you’ll proceed to closing. Thoroughly review all documents before signing, ensuring you fully understand your commitments and obligations.

💡How to order your credit reports

You can order your credit reports from Equifax, Experian and TransUnion — the three largest credit report agencies — once a year through the federally authorized AnnualCreditReport.com website. Reviewing your contact information, open accounts and loans, outstanding balances and payment information for accuracy, and reporting any inaccurate or incomplete information directly to the bureau, is just one way to safeguard your financial information from online fraud and other scams on the rise.

🔍 Read more: Do you qualify for homebuyer assistance? You might — even if you've already owned a home

10 smart ways to save money on your mortgage

While you can’t control what happens with interest rates, there are ways you can position yourself and your financial situation for approval at the lowest rates — and reduce your overall loan costs. Explore these smart tips for saving money on your mortgage.

1. Improve your credit score before applying

Your credit history plays a big role in the rate you get. Before applying for a mortgage, work to pay your bills on time. On-time payments alone account for 35% of your credit score.

Keep any credit card and other high-interest balances as low as possible for a strong credit utilization ratio, a percentage that tells lenders how much of your available credit you’re using — and how well you can manage your debt.

To project as much financial stability to potential lenders as possible, avoid opening new credit accounts in the months leading up to your mortgage application.

2. Budget for a down payment of at least 20%

If you’re applying for a conventional or FHA loan, aim to put down at least 20% to avoid paying private mortgage insurance on your loan. More commonly called PMI, this insurance protects your mortgage lender from loss if you aren’t able to repay what you borrow.

A larger down payment also reduces your loan amount and risk to the lender, which can position you to snag a lower rate.

3. Consider buying mortgage points

Mortgage points are like discounts you can buy up front to lower your overall interest rate and monthly payments. Each point typically costs 1% of your loan amount and lowers your rate by 0.25%.

Say you’re approved for a 6.5% rate on your $400,000 mortgage. Buying mortgage points would cost you $4,000 each — buying 1 point for $4,000 could reduce your mortgage rate to 6.25%.

But before you choose a rate buydown, be sure to compute the breakeven point to ensure you'll stay in your home long enough to benefit from the upfront costs. For example, you might find that by putting that extra money toward your down payment, you can eliminate any PMI costs faster — or altogether.

4. Shop around for the best offers

Comparing lenders and mortgages is among the best ways to make sure you’re getting the most competitive offer. Read the reviews of at least three to five banks or lenders, and take a close look at the annual percentage rate — or APR — which represents not only the interest you’ll pay on your loan but also the loan’s fees. Shop around for quotes from a range of lenders, including online lenders and credit unions.

6. Make extra payments toward the principal

You could apply for a shorter loan term to lower the interest you pay over the life of your loan. But you can often accomplish the same goal by applying for a traditional 30-year mortgage and simply focusing on making extra payments on your principal to pay it off faster.

Even small additional payments can significantly reduce your interest over time. For example, making bimonthly payments instead of monthly payments — if your lender allows it — can add up to an extra payment each year. Making weekly payments, as well as occasional lump-sum payments from work bonuses and other windfalls can reduce your interest even further. You’ll also build valuable equity faster: Every extra dollar that goes toward your principal represents a dollar of equity in your home.

7. Refinance when interest rates drop

If you’ve locked in a relatively high rate on your mortgage, you may be looking to refinance later to get a lower rate, shorten your mortgage’s term or convert from an adjustable-rate mortgage to a fixed term.

But because refinancing comes with closing costs, you’ll want to make sure the end result is worth the time and money. One way to confirm this is to find your breakeven point — or the point at which the money you’re expected to save exceeds the costs of refinancing. First, add up the upfront costs of closing and then divide that number by your expected monthly savings. The result is the number of months it will take for you to break even.

[refinancing costs] / [estimated monthly savings] = [break even point in months]

Say you’re looking to refinance your mortgage to save $300 a month. If closing costs are $9,000, it would take you 30 months to break even — 2.5 years that could be worth the $3,600 a year in monthly savings.

$9,000 / $300 = 30 months

8. Ask your lender to remove PMI as soon as it’s possible

If you aren’t able to pay at least 20% of your home’s purchase price as a down payment, you’ll be required to pay private mortgage insurance — or PMI. But with a conventional loan, you can eliminate this payment after you sign the mortgage when you reach 20% equity. If it doesn’t drop off your bill automatically, simply request that your lender remove it.

Note that for FHA loans, you’ll need to refinance your loan to a conventional loan to remove mortgage insurance, as it stays with the loan for life.

9. Negotiate your closing and lender fees

While some closing costs fees are set in stone, several others can be negotiated with your lender as part of the borrowing process. These include your loan’s application fee, origination and underwriting fees and title insurance.

Start by asking for a breakdown of fees related to your mortgage, and then ask your lender if it’s willing to lower or even eliminate one or a group of these fees. If you see costs that are unusually high, ask about whether there’s a way to pay less.

10. Ask about autopay discounts

Many mortgage lenders offer a small interest rate reduction if you commit to automatic payments. Autopay discounts aren’t simply to save you money — rather, they’re an incentive for you to commit to automatic withdrawals from a designated checking account that lenders can reasonably guarantee on-time repayments. For you, it also means never missing a payment or paying a penalty, further protecting your credit score.

🔍 Read more: How to get the lowest rate on your next mortgage

About the writer

Kat Aoki is a seasoned finance writer who's written thousands of articles to empower people to better understand technology, fintech, banking, lending and investments. Her expertise has been featured on sites like Lifewire and Finder, with bylines at top technology brands in the U.S. and Australia. Kat strives to empower consumers and business owners to make informed decisions and choose the right financial products for their needs.

Article edited by Kelly Suzan Waggoner

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Source: “AOL Money”