Chat
Chat with Sales Hours: Monday-Friday 8:30 a.m. - 4:30 p.m. (CST)
Contact Sales
Call Sales Toll-Free 1-(866) 774-3282 Hours: Monday-Friday 7 a.m. - 5 p.m. (CST)
Product Login
Product Log-in
Product Support
Product Support
Email Sales
Contact Sales
After Hours
  • Support
  • Sign In Sign In
  • AUS NZ UK
CoreLogic - Home
  • Solutions
    view solutions by:

    Data Solutions

    • Lead Generation
    • Property Data
    • Location Intelligence

    Real Estate

    • Multiple Listing Enterprise
    • Agent & Broker

    Mortgage

    • Origination
    • Servicing
    • Appraisal
    • Commercial Property Tax

    Insurance

    • Hazard Risk
    • Catastrophe Risk Management
    • Risk Evaluation
    • Underwriting Automation
    • Weather
    • Claims Automation
    • Restoration
    • INTRCONNECT

    Mortgage Lenders

    • Origination

    Mortgage Servicers

    • Residential Property Tax
    • Default & Loss Mitigation
    • Portfolio Insight & Monitoring

    Mortgage Appraisers

    • Appraisal

    Real Estate Agents & Brokers

    • Agents & Brokers

    Real Estate MLS

    • Multiple Listing Enterprises

    Commercial Real Estate Owners

    • Commercial Property Tax

    Marketing Departments

    • Property Data

    Insurance Underwriters

    • Risk Evaluation
    • Underwriting Automation
    • Hazard Risk
    • Catastrophe Risk Management

    Insurance Risk Managers

    • Risk Evaluation
    • Hazard Risk
    • Catastrophe Risk Management

    Insurance Claims

    • Claims Automation
    • Restoration Contractors
    • Weather Verification

    Construction Contractors

    • Restoration Contractors

    General

    • Location Intelligence
    • Lead Generation
    • Data Solutions
  • Resources

    Reports

    • Climate Change
    • Construction Cost Update
    • Construction Insights
    • Home Price Insights
    • Homeowner Equity Insights
    • Loan Performance Insight
    • Mortgage Fraud
    • Property Tax Delinquency
    • Single-Family Rent Index

    Insight Blogs

    • Hazard HQ
    • Office of Chief Economist
    • Affordable Housing
    • Homebuying
    • Insurance
    • Other Articles

    More Resources

    • Events
    • Case Studies
    • White Papers
    • Podcasts
    • Quick Takes
  • Company
    • About
    • Leadership
    • Newsroom
    • Contact
    • Careers
  • Search
CoreLogic - Home
  • Solutions
  • Resources
  • Company

    • About
    • Leadership
    • Newsroom
    • Contact
    • Careers
  • Accounts

    • Products Sign-in
  • Contact

    • Sales Contact
    • Product Support
  • Regions

    • Australia
    • New Zealand
    • United Kingdom
  • Social

    • Facebook
    • Instagram
    • Linkedin
    • Twitter
    • Youtube
Solutions
VIEW BY:
  • Data Solutions

    • Lead Generation
    • Property Data
    • Location Intelligence
  • Real Estate

    • Multiple Listing Enterprise
    • Agent & Broker
  • Mortgage

    • Origination
    • Servicing
    • Appraisal
    • Commercial Property Tax
  • Insurance

    • Hazard Risk
    • Catastrophe Risk Management
    • Risk Evaluation
    • Underwriting Automation
    • Weather
    • Claims Automation
    • Restoration
    • INTRCONNECT
  • Mortgage Lenders

    • Origination
  • Mortgage Servicers

    • Residential Property Tax
    • Default & Loss Mitigation
    • Portfolio Insight & Monitoring
  • Mortgage Appraisers

    • Appraisal
  • Real Estate Agents & Brokers

    • Agents & Brokers
  • Real Estate MLS

    • Multiple Listing Enterprises
  • Commercial Real Estate Owners

    • Commercial Property Tax
  • Marketing Departments

    • Property Data
  • Insurance Underwriters

    • Risk Evaluation
    • Underwriting Automation
    • Hazard Risk
    • Catastrophe Risk Management
  • Insurance Risk Managers

    • Risk Evaluation
    • Hazard Risk
    • Catastrophe Risk Management
  • Insurance Claims

    • Claims Automation
    • Restoration Contractors
    • Weather Verification
  • Construction Contractors

    • Restoration Contractors
  • General

    • Location Intelligence
    • Lead Generation
    • Data Solutions
Resources
  • Reports

    • Climate Change
    • Construction Cost Update
    • Construction Insights
    • Home Price Insights
    • Homeowner Equity Insights
    • Loan Performance Insight
    • Mortgage Fraud
    • Property Tax Delinquency
    • Single-Family Rent Index
  • Insight Blogs

    • Hazard HQ
    • Office of Chief Economist
    • Affordable Housing
    • Homebuying
    • Insurance
    • Other Articles
  • More Resources

    • Events
    • Case Studies
    • White Papers
    • Podcasts
    • Quick Takes

Home / Intelligence / Monthly Mortgage Payments on Recent Home Purchases Are Significantly More Expensive

ABOUT THE AUTHOR
Yanling Mayer
Yanling Mayer
Principal, Economist
View Profile
  • March 18, 2022

Monthly Mortgage Payments on Recent Home Purchases Are Significantly More Expensive

For many first-time homebuyers, surging home prices have overshadowed potential savings from record-low interest rates

In response to the outbreak of COVID-19 and the resulting economic shocks experienced by the U.S. and global economies, the Federal Reserve slashed its target interest rate to nearly zero and kept it between 0% and 0.25% from March 15, 2020, until March 16, 2022, when the Fed announced it will raise the target interest rate by 25 basis points to 0.25-0.5%. For existing homeowners, the resulting low interest rates meant opportunities for billions of dollars of savings in mortgage interest, prompting millions of homeowners to refinance their existing mortgage for a lower rate.

Record-low interest rates also meant that for many, it was the right time to buy a home and invest in wealth-building homeownership.

As millions of existing homeowners geared up to refinance, many potential homeowners were ready to take advantage of this opportunity to buy a property and lock in low financing costs. Many homebuyers were also seeking amenities such as larger living spaces, fenced backyards and spare rooms for offices as COVID-19 mitigation strategies drove remote work and intensified the demand for space and privacy — amenities that are typically lacking in urban locations, apartments or small rental homes.

However, the real savings that many potential buyers expected from record-low interest rates were quickly outstripped by the pandemic-fueled housing demand and price increases that followed a temporary market shutdown. Fueled by low interest rates and rising demand but constrained by limited supply, the pandemic housing market became one of the hottest on record. According to the CoreLogic National Home Price Index, the 2020-2021 pandemic housing market recorded the fastest annual home price appreciation in the 45-year history of the index.

Figure 1 plots the amount spent on a typical mortgage payment for newly originated purchase loans, breaking down the trend by the source of financing. Figure 2 shows the corresponding percent changes in monthly mortgage payments during the pandemic. The typical monthly payment includes principal and interest (P&I), property taxes, homeowners’ insurance, HOA fees and mortgage or flood insurance, if applicable[1].  Together, these monthly out-of-pocket cash obligations indicate the recurring cost of homeownership.

Figure 1: Typical Monthly Mortgage Payment by Source of Financing

Figure 1 Typical Monthly Mortgage Payment by Source of Financing
Source: CoreLogic Loan-Level Mortgage Analytics Data; CoreLogic HPI.
© 2022 CoreLogic,Inc., All rights reserved.

Note: The monthly mortgage payment is based on 30-year, fixed-rate home-purchase loans.

Figure 2: Rising Monthly Mortgage Payment and Rising Home Prices During the Pandemic

Figure 2 Rising Monthly Mortgage Payment and Rising Home Prices During the Pandemic
Source: CoreLogic Loan-Level Mortgage Analytics Data; CoreLogic HPI.
© 2022 CoreLogic,Inc., All rights reserved.

Figure 1 shows that after a temporary decline and deviation from the pre-pandemic payment trends, monthly mortgage payments on home purchase loans rose quickly in the second half of 2020. This trend continued throughout 2021 as the pandemic housing market recovered at full speed and sent home prices soaring.

Recent homebuyers who financed their purchases using FHA loans — many of whom are likely first-time homebuyers — have seen a quick increase in their typical monthly payment despite the potential savings from record-low interest rates. In the second half of 2021, the typical monthly out-of-pocket cost for those using FHA financing reached $1,710, up $282 or 19.7% from the rates just prior to the onset of the pandemic.  

Monthly payments on home purchases financed with VA loans showed a double-digit increase as well, rising $176, or 11.3% from pre-pandemic levels. In contrast, recent homebuyers who financed with conventional loans appeared to have captured significant interest savings, seeing monthly payment increases of only 3.3%, or $57 per month. Many of these homebuyers are likely repeat or trade-up buyers who were able to afford a large down payment to obtain a more favorable interest rate.[2].

First-time homebuyers often use FHA loans for financing lower-priced starter homes, and the surge in starter home prices has inadvertently eroded affordability and contributed to pricing out families who hope to become first-time homeowners.

Figure 2 shows home price appreciation rates during the same period. Appreciation rates are based on CoreLogic’s Home Price Index (HPI), and the trend line titled “HPI: All Sales” measures price growth using all home sales, including starter homes, while the trend line titled “HPI: Starter Homes” captures the growth for lower-priced starter properties only[3].  It is evident that soaring home prices have far outpaced any potential interest savings during the pandemic. Furthermore, the much faster appreciation of starter homes as compared to the overall market helps underscore the soaring cost of mortgage payments for recent homebuyers who used FHA or VA financing.

On an annual basis, rising monthly mortgage payments mean that those who bought a home in 2021 will pay an additional $3,379 per year if the home was financed with an FHA loan. Given a 30-year loan term, which is the most commonly used financing term, these homebuyers will pay an additional $101,400 over the next 30 years. For VA loans, this additional payment is $2,107 per year or $63,200 over the life of the loan, and for loans that are financed conventionally, this figure is $688 per year or $20,650 over 30 years.

Home prices continue to show strong upward momentum with no signs of leveling off. In addition, mortgage rates have been on the rise in recent weeks, making it inevitable that the monthly cost of homeownership will become more expensive in 2022. 

2022 CoreLogic, Inc. , All rights reserved.

[1] The non-P&I component as a percent of total monthly payment varies by source of financing. The median value of the non-P&I component is about 28% among conventional loans and 34% and 23-24% for FHA and VA loans, respectively. All FHA loans have mortgage insurance, which explains its larger non-P&I share. Among the non-P&Is, homeowners’ insurance or mortgage insurance is directly tied to the value of the home or loan amount, and rising home prices or larger loans means the costs associated with non-P&I tend to go up accordingly.

[2] It should be noted that several other factors that affect loan size or borrower affordability are not accounted for, including borrower income, loan-to-value ratio, debt-to-income (DTI) ratio and FICO score. The average borrower DTI inched higher and showed signs of slight deteriorations in affordability in 2021. Additionally, the average borrower FICO score rose slightly throughout the pandemic.

[3] Starter homes are those with a sale price threshold at or below 75% of local market’s median price. 

  • Category: Blogs, Intelligence, Office of the Chief Economist
  • Tags: Affordability, Market Trends, Pandemic
ABOUT THE AUTHOR
Yanling Mayer
Yanling Mayer
Principal, Economist
View Profile

Related Posts

mississippi tornadoes
Blogs

March 24 EF-4 Tornado in Mississippi

CoreLogic estimates over 4,100 homes were within the path of the tornado that hit Mississippi on March 24, 2023.

March 29, 2023
California Atmospheric Rivers
Core Conversations

What Was it Really Like to Live Through the California Floods? Our Team Spills | Part 2

In Part 2, host Maiclaire Bolton Smith talks about the atmospheric rivers and the snow that has made headlines and headway in altering California’s natural hazard landscape.

March 29, 2023
CSI_Promo_Mar2023
Blogs

US CoreLogic S&P Case-Shiller Index Gain Slows to Pre-Pandemic Low, Up by 3.8% Year Over Year in January

The index continued to decline year over year in January, again posting a single-digit gain.

March 28, 2023

About Corelogic

  • Newsroom
  • Leadership
  • Careers
  • Ethics & Compliance

Accounts

  • Products Sign-in

Contact

  • Sales Contact
  • Product Support

Regions

  • CoreLogic Australia
  • CoreLogic New Zealand
  • CoreLogic UK

Follow & Connect

  • Facebook
  • Instagram
  • Linkedin
  • Twitter
  • YouTube
© 2023 CoreLogic. All rights reserved.
  • Legal
  • Privacy Policy
  • CCPA
  • Cookie Preferences
  • Security
  • Sitemap
  • Accessibility
  • Legal
  • Privacy Policy
  • CCPA
  • Cookie Preferences
  • Security
  • Sitemap
  • Accessibility