01The honest number
What a mortgage really does
The payment is flat. What it buys you is not. The same check means something different in year 2 and year 20, and the difference decides how much house is wise.
worked example · $450k home · 20% down · 6.52% · 30 years
The two halves
Every payment is two payments wearing one number.
Part of each check buys back a piece of the house. That part is yours: it comes home as equity. The rest is the price of the money, interest paid for the loan, and it never comes back. The payment stays flat for thirty years, but the split inside it moves every single month.
Early on, the split is not close. Drag the year below and watch the same $2,280 check change its meaning.
$334
of your $2,280 payment becomes yours · year 1
$1,946
goes to interest / mo
$355,991
still owed at year end
21%
of the home is yours
The crossover
There is a month, years in, when the balance quietly tips: more of your payment starts building your equity than paying for the money. On this example it arrives in year 20. Before that point, the loan is winning. After it, you are.
What thirty years costs
in daylight$821k
paid over the life of the loan
$461k
of it is interest · est.
$360k
was the money you borrowed
This is not an argument against buying. It is the price of time, in daylight. Knowing it is what lets you decide how much house is wise instead of how much is approved.
Beyond twenty percent
Twenty percent down is the number everyone repeats, because it is where lenders drop mortgage insurance. But on a more expensive home, it is worth asking a second question: what does each extra five percent actually buy you?
| Down payment | Monthly P&I · est. | Lifetime interest · est. | Mortgage insurance |
|---|---|---|---|
| 20% | $2,280 | $461k | none |
| 25% | $2,138 | $432k | none |
| 30% | $1,995 | $403k | none |
The bigger down payment buys a smaller monthly and a smaller lifetime interest bill, at the cost of cash you no longer have for repairs, moving, or simply breathing room. There is a counter-case: money kept liquid has value too, and emptying savings to hit a rounder percentage can be the worse trade. The right answer is the one that leaves both the monthly and the savings account comfortable.
Try it with your numbers
Run it yourself
Change the price, the rate, the down payment and the term. Watch the interest move.
Monthly includes principal, interest, property tax, insurance and PMI where it applies. Total paid adds your $90k down payment and every carrying cost across the term. Tax and insurance are held at today's rate, so real bills land higher.
The 15-year costs $860 more each month and saves $256k in interest over the life of the loan. Principal overtakes interest in year 20 on the 30-year.
What another five percent down is worth
Same house, same rate, 30-year term. Each row is the interest you would pay over the whole loan, and what you save against the smallest down payment. Below 20% a lender adds PMI, which stops once you reach 20% equity.
These are estimates, not a lender quote. To see the honest monthly cost on real homes across every town we cover, start free.
year 20
when your money starts winning · est.
The mortgage is only the first line of the real monthly cost.
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