Buying a $1 Million Home? Here's What Your Mortgage Will Be

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By Steve Nicastro Updated October 12, 2023


How million-dollar mortgages work | With a conventional loan | Piggyback loan | Jumbo loan | Which mortgage should I get?

For a home buyer living in a baseline area , the monthly mortgage payment on a $1 million home may range from $4,354 to $5,329.  These numbers are based on:

  • A 30-year conventional mortgage with a balance of $726,200, the maximum amount allowed under Fannie Mae and Freddie Mac guidelines
  • A down payment covering the remaining balance of $274,800
  • A fixed interest rate of 6% to 8%
  • Principal and interest payments only

In high-cost areas , such as parts of California or New York City, the loan limit rises to $1,089,000. In this case, your monthly payment would range from $5,696 to $6,971. You might be able to buy a $1 million home with just 5% down, or $50,000.

CriteriaBaseline areaHigh-cost area
Loan limit$726,200Up to $1,089,000 million
Down payment$274,800$50,000 (5%)
Mortgage balance$726,200$950,000
Monthly payment$4,354–5,329$5,696–6,971
Source: Conforming Loan Limit Map, Federal Housing Finance Agency

However, these figures do not include private mortgage insurance, which is required when you put less than 20% down, plus other costs, including property taxes and insurance.

Getting a mortgage on a $1 million home

Mortgages on $1 million homes work differently than mortgages on lower-priced houses because of conforming loan limits, the maximum amount allowed under Fannie Mae and Freddie Mac guidelines.[Conforming Loan Limit Values, Federal Housing Finance Agency]

For "conforming mortgages" in baseline areas — i.e., within the conforming amount of $726,200 — the process is straightforward: buyers typically make a down payment of up to 20% of the home's purchase price. Whatever amount remains is the mortgage balance.

The process flips for mortgages above $726,200. The loan limit determines the mortgage amount, and the remainder is the buyer's down payment.

Example: $500,000 home vs. $1 million home

Home priceDown paymentMortgage amount
$500,000$100,000$400,000 (remaining balance)
$1,000,000$274,800 (remaining balance)$726,200
$1,500,000$774,800 (remaining balance)$726,200
Based on a maximum loan limit of $726,200 and a 20% down payment.

Because of the hefty down payment requirements, lenders offer alternative loans that can be more affordable up front.

A piggyback loan, also known as a combination mortgage, is a multi-part loan to cover separate parts of the home purchase. For example, with the most common type of piggyback loan, an 80/10/10 loan:

  • The primary mortgage covers 80% of the home's purchase price
  • A second mortgage or home equity line of credit covers 10%
  • Your down payment covers the remaining 10%

Jumbo loans exceed conventional mortgage limits. They're hard for most borrowers to qualify for because jumbo loans tend to have stricter credit score and income requirements than traditional mortgages.

So which mortgage should I get?

Conforming conventional loanPiggyback loan (80/10/10)
  • Big down payment
  • Fixed rate
  • Low down payment
  • Adjustable rate after 3–5 years
👍 Right for buyers who:
  • Have a lot of cash reserves
  • Plan to sell or refinance within 3–5 years
👍 Right for buyers who:
  • Need cash at the start of their mortgage
  • Can handle potentially volatile interest rates
  • Plan to sell or refinance after 3-5 years

Other factors impacting $1 million house approval

Monthly payments on a $1 million house with a conventional loan

Here's a range of monthly payment estimates (principal, plus interest) for a conventional loan, based on interest rates.

30-year term15-year term
Interest rateMonthly paymentInterest rateMonthly payment
* ~$2,017 principal, plus interest.
** ~$4,034 principal, plus interest.
Based on $726,200 mortgage.

Total interest costs: $726,200 mortgage at 7%

Mortgage lengthMonthly paymentTotal interest paid
15 years$6,518$448,094
30 years$4,825$1.01 million

Deciding which loan terms work best for you comes down to weighing total cost versus. flexibility.

For borrowers who want to minimize costs and who can handle higher monthly payments, a 15-year term might be the ideal choice.

For those valuing financial flexibility, the 30-year term is a sound choice. The monthly payments are more manageable. And you can refinance the loan in the future if interest rates dip.

Consult with a mortgage professional for more specific advice tailored to your circumstances.  

Monthly payments on a $1 million house with a piggyback loan

A piggyback loan can help you keep a high mortgage conforming and potentially more affordable.

With an 80/10/10 underwriting approach, you can mortgage 80% of the property's price, finance 10% with a second mortgage or HELOC, and make a 10% down payment.

👍 Piggyback benefits:

  • No private mortgage insurance (PMI)
  • Easier qualification

👎 Piggyback downsides:

  • Higher interest rate on the second loan
  • Variable-rate home equity line of credit (HELOC)

If your piggyback loan is a HELOC, the interest rate and your payments will fluctuate annually based on the market.

"The interest rate for a second mortgage [HELOC] is usually around the prime rate, between 8.5% to 10.5%, with interest-only payments for 3 to 10 years."

Joe Moore, division manager, Secured Choice Lending

80/10/10 loan example ($1 million house)

A $1 million property financed with a $800,000 first mortgage and a $100,000 second "piggyback" mortgage HELOC will have a total monthly payment of $6,072.

However, you may be paying interest only on the second mortgage for the first three years. Then your payments include principal, too, and get higher.

FinancingLoan amountInterest rateMonthly paymentTerms
1st loan (80%)$800,0007%$5,32230 years, principal + interest, fixed rate
2nd loan (10%)$100,0009%$7503 years, interest only, rate varies annually
Down payment (10%)$100,000N/AN/AOne-time payment
Figures are based on high-cost areas where the conforming loan limit is $1,089,300.

Jumbo loans

A jumbo loan is a home loan used for higher-priced property exceeding federal loan limits ($726,200 for one-unit property, and $1,089,300 in high-cost areas in 2023.)

According to industry expert Joe Moore, jumbo loans are a less popular choice among borrowers, accounting for only 2-3% of all mortgage loans. The low popularity is due to its stringent requirements.

For example, jumbo loan borrowers typically have to maintain cash reserves of 6 to 20 months of their mortgage payments, according to Moore. That means lenders need to see you have $36,000 to $120,000 in your bank account to afford a $6,000 monthly payment.

Applicants still need to make a big down payment, often 10% or more, as well as have a high credit score (680 minimum).

Payments on million-dollar mortgages vary depending on:

  • The type of loan
  • The loan's interest rate
  • Repayment term
  • How much you put down

Type of loan: Conforming vs. nonconforming

Conforming loans are mortgages that meet loan limits set by federally backed mortgage companies Fannie Mae and Freddie Mac. The baseline loan limit is $726,200, though it can go over $1 million in higher-cost areas like California. Conforming loans include conventional, FHA, or VA loans.

One way you can finance the purchase of a $1 million house is to get a conforming loan with a piggyback loan — a second mortgage to cover part of the down payment.

Nonconforming loans (or jumbo loans) exceed the conforming loan limits. Lenders consider these loans to be extra risky and rarely approve them.

Interest rate

With big loans, even a small difference in the interest rate can significantly affect the amount of interest paid over time.

You might be able to get a lower rate for jumbo loans, but you’ll also need access to a lot of cash.

Repayment term: 30 vs. 15 years

If you have a longer repayment term of 30 years, you’ll have a lower monthly payment. But because the loan will be accruing interest for a longer period of time, you’ll pay more than you would with a shorter repayment term.

A shorter-term loan of 15 years will save you more on interest in the long run, but you'll also have a significantly higher monthly payment. Lenders are less likely to approve a short-term loan if you have a high level of debt.

Down payment

The more money you can put down on a house payment, the smaller the loan and the lower your monthly payments.

Note: You'll also need to cover various buyer closing costs, such as mortgage origination fees, home appraisal, and home inspections.

This article was reviewed by Joe Moore, division manager at Secured Choice Lending.

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