If you earn $200k per year, you can afford a mortgage of up to $500,000 using the 2.5 rule. However, it is important to take into consideration additional factors such as interest rates and loan duration. If you choose a 30 year period with a 4.5 per cent interest rate, your monthly payments will be $2533 and the total cost over the course of the loan will be $912,034 due to interest. To ensure you are making the best financial decision for your situation, it is recommended to consult with a financial advisor or mortgage specialist and consider all aspects of your finances before making any major housing decisions.
Here are a few key takeaways to keep in mind:
As a general rule, your mortgage should not exceed 2.5 times your annual income if you want to comfortably afford your monthly payments. In this case, a $500,000 mortgage would be appropriate for someone earning $200k per year.
Interest rates will have a significant impact on your monthly mortgage payments and the total cost of the loan. It is important to shop around and find the best rate possible to save money in the long run.
30 year mortgages are the most common but shorter loan periods such as 15 or 20 years can save you money on interest and reduce your overall loan cost.
It is always wise to seek the advice of a financial professional to ensure you are making informed decisions that align with your long-term financial goals.