How Much Income Do You Need To Afford a Million Dollar Home?


real estate tips, purchasing a big home, buying a home tips

One of the measuring sticks that many people use to determine if they are successful is the value of their home. Being able to say, I can afford a million dollar home, is a milestone that many would agree in saying represents success. The question is, how much income do you need to afford a million dollar home?

To answer that question, we need to figure out what a typical mortgage payment for a million dollar home would look like, then we can determine just how much income you need to afford a million dollar home.  A monthly mortgage payment is more than just the principal and interest. For example, it would also include funds that are typically put into an escrow account to be paid as needed.

Principal And Interest

Checking today’s interest rates, a 30-year loan carries a rate of 4%. Using a mortgage calculator, the monthly principal+ interest payment would be $4774.15.

Homeowner’s insurance

The cost of homeowner’s insurance will vary based on location, deductible as well as other factors.  I was quoted a ballpark quote for homeowner’s insurance in my city in the Midwest with a typical $1000 deductible. The quote given to me was $3800 per year or $316.67 per month.

Property Taxes

Property tax rates also vary significantly depending on where you live. Usually, property tax rates are set by the county you live in. My county assesses a property tax rate of 1.05% of the value of the home. Using that rate, a home worth one million dollars would have an annual property tax bill of $10,500 or $875 a month.

Private Mortgage Insurance (PMI)

If a person would finance the full price of the home, private mortgage insurance (PMI) would have to be paid until the loan to value rational drops below 80%. PMI rates may also vary, but for this exercise, my lender quoted me a monthly PMI payment of $416.67.

Total Payment

Using the above information, our sample mortgage payment for financing a million dollar home is:

  • Principal + Interest: $4774.15
  • Homeowner’s Insurance: $316.67
  • Property Taxes: $875
  • Personal Mortgage Insurance: $416.67

Total Monthly Mortgage Payment: $6382.49

Income Needed To Afford a Million Dollar Home

Now that we have an idea of how much a mortgage payment would be on a million dollar home, we can determine what kind of income is required to afford it. As with many of the components in this process, how large of a payment the bank thinks you can afford can vary. A person’s current monthly debt payments could reduce the amount a lender may borrow. Without knowing a specific person’s current debt situation, a good rule of thumb is to keep your mortgage payment to a maximum of 28% of your gross income.

Using that figure, a person would need an income of $273,535 to afford a million dollar home.

There’s a lot of variability in determining what a mortgage payment would be for a home worth a million dollars. This article calculates a sample value, but it could be very different by changing a few values such as the down payment, the interest rate, or the annual property tax amount. But given the template of how the value was calculated, a person should be able to gather the specific information and for their unique situation and answer the question, how much do I need to earn to afford a million dollar home?

How about you, Clever Friends, have you ever looked into how much you would have to earn to afford a million dollar home in your area?

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About the author

Brock Kernin


  • While what makes a million dollar home can vary depending on location, in most places a million dollar home is a big home with big utility bills and eventually big repair bills. It is also a home in an area where “keeping up with the Joneses’ is important; no harvest gold or country blue kitchens anymore; it’s even time to take out the 1990’s oak cabinets and put in white. In short, the holding costs on a milliion dollar home are generally much more than those on a more moderately priced place.

    • That certainly makes sense, RAnn…the more something costs, the more it costs to maintain. The analysis here is only what it would cost to actually purchase the home, but one certainly has to factor in what it would cost to own it day to day.

    • New York agent Tremescia Kegler says she tells her buyers to start with the monthly payment they can comfortably afford, then approach the lender to determine the maximum mortgage amount based on rates and their credit. “This keeps buyers focused on their particular housing budget,” she says. “Nothing is worse than closing on your dream house only to be ‘house poor.’”

  • Those are sobering numbers. I would hope that if someone was looking to buy a million dollar home (outside of, say, the Bay Area of NYC) that you would put at least 20% down. Not only would it take away the PMI, but it would lower your monthly payment. What a fun thought exercise!

    • I agree, Jax….and a million dollar home in one location may be very different than a million dollar home in another location of the country!

    • People like to spend their money on different things. For me a nice home (where I spend a lot of time) is something I wouldn’t mind sinking a lot of resources. But then again, there’s a limit to that, and I live in a (relatively speaking) low cost of living area of the country. A million bucks buys a LOT where I live.

  • Well… I think it’s safe to say I’ll never afford a million dollar home 😀

    Kidding aside, I’ve always wanted a small house. Small, just a few rooms and a backyard. And an attic. Nothing fancy. And from what I’ve seen, small homes cost about 1/5th of a million, even less. Phew! 😀

    • Not necessarily! Our million dollar home in Sunnyvale was small, 3 bedrooms, 1 bath, all original everything, built in the 40’s and it’s worth 1.2 mil – CRAZY!

  • I think your math is wrong. $6382/28 doesn’t equal $275,000. It is $228,000. Also, some mortgage companies will allow up to 41% of income to go to home payments if amazing credit rating and no debt.

  • This was exactly what I was looking for. I found a home I loved in Nashville and thought “what would it take to own this” beautiful 1.6 Million Dollar home. The reality seems to be that in most major cities Million Dollar homes aren’t actually as excessive as you would think. This particular home had 5 bedrooms and a nice backyard, updated kitchen, and multi car garage. It was a luxury for sure but not over the top if you are wanting kids and a guest room. 300k isn’t a lot; its definitely blessed but it’s achievable with two working adults with successful careers. Thanks for such an informative article!

  • In our area here in Monterey County, an average home is about a million dollars. This is creating a real problem for ordinary people because your teachers, police officers, plumbers, and car mechanics – not to mention hotel and restaurant workers – can’t afford that. As a result, many live far away and have to commute in. But California keeps adding costs (requiring solar panels, fire sprinklers, lots of fees) and restricts the ability to build (height limits and zoning restrictions) and our state is now several million homes short of what we need.

    Employers are starting to complain about the lack of affordable housing in our area, and many city leaders are also aware of the needs, but the people already here don’t want to see things change. Not in my back yard, but please come to fix the toilet when I need it…

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