The Ideal Mortgage Amount Is $1 Million Dollars (If You Can Afford It)

Talin EstoniaWhoah, that’s crazy! I can hear some of you who don’t live in an expensive part of the world say. Meanwhile, some of you are surely thinking you can’t get anything livable with a $1 million mortgage. The ideal mortgage amount of $1 million is based on the premise that the ideal income for maximum happiness is $200,000 per person.

Back in 2002, a $1 million mortgage cost around $50,000 to $65,000 a year in interest expense given mortgage rates were 5%-6.5% for a 5/1 ARM or a 30-year fixed. Multiply the annual interest expense by three, and you get $150,000-$195,000, the minimum annual income recommended to take out such a loan.

In 2015, a $1 million mortgage costs around $22,500 to $35,000 a year in interest expense given mortgage rates are now 2.25%-3.5% for a 5/1 ARM or a 30-year fixed. Multiply the annual interest expense by three again and you get $67,500 to $105,000, a far cry from the $150,000-$195,000 you originally needed to make! Note, banks still only lend out 3-4X your income despite a drop in rates.

It is aggressive to think that someone who only makes $79,500 a year in gross salary can afford a $1 million mortgage, but it’s also absurd that one can borrow $1 million dollars nowadays for only 2.625%! I’m not recommending everyone with impecable credit scores, great financial habits, and steady savings rates all get $1 million mortgages. I’m just saying that it’s now possible for someone making $79,500 a year to service $1 million worth of debt at 2.625% if the bank approves.


1) The law says so. The maximum mortgage interest indebtedness is $1 million dollars according to the IRS. In other words, if you have a $2 million dollar mortgage that costs $70,000 a year in mortgage interest, only $35,000 of the mortgage interest can be deducted from your income. Your tax savings is simply $35,000 X tax rate. The IRS also stipulates that you can deduct the interest on a $100,000 Home Equity Line Of Credit if the money is used other than to build, improve or purchase your home. Crazy but true.

2) Maximum government subsidy. The home mortgage interest deduction is one of the largest government subsidies available to all citizens. In an environment when all it seems like the government does is take, take, take, citizens get something tangible and immediate back from the government. The government helps subsidize your lifestyle and lower your taxes. To not take full advantage of such subsidy is a shame, unless you love paying taxes!

3) Keeps you disciplined. For those who live in expensive cities such as San Francisco and NYC, keeping a $1 million dollar mortgage limit helps keep you from going overboard and buying too much house. Plenty of nice houses now cost over $2 million dollars for example. By keeping your borrowing to $1 million, you are forced to come up with a $1 million down payment before you can buy such house. You might think going the standard 20% down ($400,000) and borrowing $1.6 million is fine, but it is not ideal. You start justifying what’s an extra $600,000 in debt at that price, losing your financial discipline. I can assure you that everything because more painful the more you borrow: less deductions, higher mortgage payment, and more stress.

4) Asymmetric risk and reward. In America, when you borrow a ton of money from a bank and can’t pay it back one day, you don’t get stoned to death, castrated, or impaled in the heart by a spear. Instead, you hand back the keys to the bank who agreed to take on your home as collateral in case of non payment. If you are lucky to live in a non-recourse state, the bank can’t go after your other assets! If you live in a recourse state, then a short-sale or foreclosure will temporarily slaughter your credit score for 3-7 years. Better your credit score then your private parts right? Meanwhile, if you happen to invest in the right cycle, you can make a massive amount of money when you finally sell or rent the property out without having to give the bank any of the upside! Isn’t America great?

5) You make closer to the ideal income. Based on my article, “The Maximum Mortgage Indebtedness Depends On Income,” how much mortgage interest you can fully deduct is based on how much money you make. Make too much, and your mortgage interest deductions get phased out. Make too little, which is under $79,500 based on existing rates, and you will feel the strain of the mortgage payments. If you or your household make between $150,000-$300,000, you are in the sweet spot to take on a $1 million dollar mortgage. Be aware if have an adjusted gross income of over $166,800, your mortgage interest starts to get phased out. For every $100 of income over $166,800 you lose $3 of itemized deduction X 33.3% up to a maximum loss of 80 percent of your itemized deductions. Lower rates have moved everybody closer to the ideal income!


If you live parts of the country which have wonderful $500,000 homes, then awesome! There is never a need to borrow $1 million dollars. The standard deduction of roughly $6,000 for singles and $12,000 for married couples is probably good enough for most. For those of you who live in expensive coastal cities, then consider $1 million dollars as the cap on how much you should borrow and calculate your mortgage payment to income ratio, loan-to-value ratio, and home value to cash left over after downpayment ratio.

Some of you reading this have liquid assets north of $1 million dollars. A $1 million dollar mortgage is therefore nothing to be afraid of because everything is just accounting. Your goal in this low interest rate environment is to minimize your debt interest expense by refinancing your mortgage and maximizing your government subsidies. Imagine refinancing your mortgage to 2.625% while making 16%+ returns on your investment guaranteed after rebalancing your portfolio? You’re essentially borrowing money for free and then some!

Don’t be afraid of mortgage debt. Instead, cherish what the government has given us and live a wonderful life knowing you are optimizing your finances.


* Shop Around For A Mortgage: LendingTree Mortgage offers some of the lowest refinance rates today because they have a huge network of lenders to pull from. If you’re looking to buy a new home, get a HELOC, or refinance your existing mortgage, consider using LendingTree to get multiple offer comparisons in a matter of minutes. The Fed is signaling interest rate hikes by 2016 due to inflationary pressures now. When banks compete, you win.

* Check your free credit score now! I highly recommend signing up for Credit Sesame, a company that provides free unlimited daily credit scores, free monthly credit reports, free 1-Bureau credit monitoring and alerts, free analysis of all your credit and loans, and free $50K identity theft insurance and ID restoration help! Unlike other “free” credit score companies who hope you forget not to cancel before their free 30-day trial is up, there’s no need to give Credit Sesame your credit card information.

A credit score is important when trying to get the best loan terms possible for a mortgage, car loan, or personal loan. Because of a delinquent $8 electric bill payment my tenant didn’t pay, I unknowingly had a credit score in the 600s that almost torpedoed my mortgage refinance! Finally, it’s simply a great idea to have constant monitoring to get a complete financial picture. You just never know with so many credit report errors and identity thieves out there. Sign up for your free credit score with Credit Sesame today. 

* Manage Your Money In One Place: Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. You can use Personal Capital to help monitor illegal use of your credit cards and other accounts with their tracking software. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their brand new Retirement Planning Calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.

Updated 2H2015

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

Subscribe To Private Newsletter


  1. says

    If you are young, wise with your finances, and aggressively investing, it makes sense to borrow $1M. I wouldn’t dream of repaying my 2.29% mortgage because I am making much more elsewhere with the money.
    But I am sending my mom to the bank this week to repay her 3.5% mortgage with the money from her 1.6% savings account!
    I would have happily taken more mortgage, I consider it “good debt” but in the UK the maximum was 4 times your annual gross, so with $80K you can borrow $320K, not $1M.

    • says

      1.6% in a savings account is great! You only get 0.2% here in the US.

      It’s the same thing here in the US… a bank will only loan out 3-5X your annual gross income, hence $200,000-$334,000 in income is needed to borrow $1 million. But, the banks are using old ratios based on rates 100% higher. This is a key point in my article.

      Everybody just got closer to the “ideal income” with a 50% chop in rates!

      • says

        I see! I got that wrong with your second paragraph saying the calculation was interest expense times three to determine the rate. Strange that the banks would keep their ratios based on high interests. It all comes down to the same though, you can borrow more cheap money!

  2. SF buyer says

    Will banks actually approve a ratio such as this? I’ve been in the market in San Francisco for some time right now and my income hits the sweet spot of what you’re outlining (~250k on two incomes, perfect credit, and $0 debt–ZERO–of any shape or form) and I’m finding they’re only willing to go to the max of conforming loan limits, which is $625k for most properties or $729k for an FHA loan (which, for separate reasons, is a tough sell in SF right now). That means my affordability is effectively that amount plus my downpayment, and not a dollar more. Am I hearing the wrong things from my brokers?

    • says

      Have you checked online with Quicken Loans or other online mortgage companies? I’ve found online mortgage companies to be a little more flexible on options given the lack of overhead.

      Bricks and mortar banks are much slower and more stringent. 3X your income is a $750,000 loan, which is the traditional ratio banks use. But since rates have dropped by 50% over the past 10 years, affordability is much better, but some banks have been slow to change.

      • says

        The low interest rates have not only helped save people money on mortgage payments, they have also saved home prices from crashing. If the rates were not lowered, the real estate market would have crashed and many people would have defaulted, causing banks to make a loss and impact the economy.

  3. says

    It’s crazy how much a difference lower interest rates can make. That’s a big drop from 150k to 79.5k in the minimum annual income on a 1mil mortgage! I admit I didn’t realize how expensive real estate prices are until I moved to SF from suburbia. I’d say it’s pretty common for small families living in the city here to have million dollar mortgages, but most of them are probably making more like $150-200k at a minimum.

    I don’t think I’d take out a $1mil mortgage here if I was a solo income earner making the minimum of 79.5k. The city is an expensive place to live in, especially with all the taxes CA has, and a salary of 79.5 would be cutting it pretty tight for that amount of mortgage.

    • says

      It really is crazy, and I am SO thankful. I’m saving so much interest expense on my rentals and primary while rents have gone up over 50% in the past 10 years. It’s amazing regarding the inflation in rent and the deflation in mortgage interest.

      These low rates have also helped thousands of homeowners stay in their homes during tough economic times. Hate the Fed all people want, but they are saving people money.

    • says

      Nice! How are the incomes and job opportunities there? Do you know of any friends making $250,000+?

      Part of the reason why I don’t mind living in an expensive area is b/c besides the attraction of the coastal cities, the incomes are much higher it seems. Hence, anywhere I move after is cheaper.

  4. says

    I think now is the time to finance as much as you can to invest in income property. Unfortunately, there probably not enough good properties for the demand. Therefore the prices will be high. It also helps if you know what your doing.

    I know when I tried to refinance my home mortgage, size did matter! If your balance is too small, it probably is not worth refinancing.

  5. Mike Hunt says


    Are you concerned with the mortgage interest cap coming down as part of future tax legislation? It’s been referenced in the debates. It would be a bummer if one took out a $1M mortgage and then the rules on deductions changed.


  6. says

    Another great article but is it really correct to say that:

    “…it’s also absurd that one can borrow $1 million dollars nowadays for only 2.625%”?

    In a world of ZIRP, government policies and QEternity which actively encourage lending and borrowing, low CPI numbers and so on, why are such low rates “absurd”? It’s certainly cheap by historical standards (anchoring), but in today’s financial world it wouldn’t appear to be completely out of touch with reality (bearing in mind that the banks are not taking a long term punt on interest rates – they are either making a spread or offloading much of the risk).

    Separately, borrowers don’t just pay interest. They also have to pay principal on their loans. Their income needs to be high enough to pay both – if you can, I agree that more debt is a good thing. Relying on selling the property or refinancing in five years isn’t a great answer – that’s how a lot of flippers got burned last time around.

  7. says

    I live in the cheap midwest where a 1 mil would literally buy a castle. This is not an ideal mortgage in my area because it would buy an absurdly huge house that wouldn’t make any sense for most people.

    In my area, you can buy a large fancy home on several acres for $300K. The ideal mortgage for me equates to the size of house that any one person needs, not some arbitrary number.

  8. says

    I don’t even think I would want to get a loan for $1mm to be honest. For me it not just about the interest but the end payment. I know I will not be moving once my wife and I purchase a home and paying 1.25-1.5 for a home is just not needed. We can put the money to better use. I think at great price for a home is $250-350k with the plans to pay it off in 15 years. Just my opinion nothing wrong with good debt but dont want that much.

  9. says

    I think you already know how I feel about this as I fully believe the next 10 years will bring the biggest transfer of wealth ever from savers to levered investors. The way the system works the best leverage is in a home that you would own anyway with 80% debt financed and 20% in equity.

    It really doesn’t make much sense to own your home right now. There just isn’t any good reason to.

    In an answer to your question, mortgage debt isn’t as scary as the realization that the alternative is guaranteed underperformance by “investing” in your mortgage debt. Nothing worse than falling behind because of fear.

    • says

      I was nervous about buying my first place, so I endend up buying at the bottom end of the range vs. the top.

      But, if I was reading my blog today and know what I know now, I would have no fear.

      Asymmetric risk reward is incredible in the US. The gov’t is on the side of the homeowner w/ all these subsidies and bailouts!

    • says

      I hope you many many small apartments, or a large apartment? Portland is so cheap compared to SF! I too, wish I bought multiple apartments in good areas 10 years ago. I’ll just have to settle for what I have and make do. Next life!

      • tbone says

        Are there any more apartments in good areas you would recommend buying now? We live in the sf bay area and pretty much already max out with the $1m mortgage with our home and a rental condo (which use to I live before getting married). We still some cash on hand and would love to get into real estate. Any recommendation you have would be great. We are married and together earning between $350k-$390k.

        • says

          Sounds like you want to get MORE into real estate, not so much get into real estate yeah? I’m biased to focus on prime properties in good areas rather than fringe properties. Better to manage good tenants than bad tenants. Burlingame, Hillsborough, Fremont, Sunnyvale, good parts of SF are seeing nice rental increases.

          It also depends on how much cash you have and your belief in the continuation of a 350-390K income.

  10. Tony says

    You took property taxes completely out of the equation. I live in the NYC area and pay 13K/year. Where do property taxes fit in your math?

      • Butch says

        You say property tax is educative as if that means “don’t sweat it, it’s a wash.” It’s not a refund or a tax credit, it’s only a 25-30% discount. You’re still paying 70% of that tax. Spending more and taking in more risk, just so that the “money Uncle Sam is giving you back” is not the best rule to live by. That’s like my wife “saving me money” when she buys more stuff on sale! The best amount of mortgage is different for every couple based on their income, age, location, risk sensitivity, and lifestyle. I would be an absolute idiot to have a $1M mortgage if there are great homes in good neighborhoods for $300K. Is it smarter than having a $2M home? Sure, but that doesn’t mean it’s optimum.

  11. Melissa says

    Thanks for the article Sam – I have a question about rentals. When do you consider it a good time to contemplate buying a rental and renting it out? Obviously the extra mortgage interest is a bonus, but do you have a rule for what kind of financial situation a person should be in before pursuing rentals? I bought my first house earlier this year and leaned more on the conservative side, so am looking forward to having rentals in maybe 10 years. Just want to have my ducks in a row!

  12. says

    Since we got neck-deep with debts and loans and experienced sleepless nights thinking how we are going to pay them off, I wouldn’t want to get into another debt anymore. Much more $1M loan! We are looking for a bigger property where we can move next year, but a $1-M mortgage is definitely too high for the budget.

  13. Mike says

    I guess I am weird. I prefer really small houses that only cost $40,000 to $100,000 to build from scratch and can be easily powered by solar. (I am not one of those green junkies but do see some advantages to green energy). Since I am single at the moment, that works for me!

  14. Darwin's Money says

    I think maxing out your real estate purchase based on today’s rates would be foolish. There are so many things that can go wrong from rates increasing to further home price declines to job loss and needing to move that it could be completely disasterous. Let’s say you have to take a 10% loss on a 300K home; $30K down the drain. On a $1 Mil home, that’s $100,000. Who can stomach that? (aside from the very wealthy).

    • says

      Is real estate still pretty bad where you are Darwin? I remember you mentioned you writing you couldn’t refinance due to the equity below 20% or something.

      It seems very clear to me real estate is improving at least in the Bay Area. Lots of people can stomach a 100k drop if they can afford a $1 mil mortgage. Real estate is for the long term.

  15. says

    We keep going back and forth on this… so far we’re staying in the low COL area because I like my job and there aren’t many jobs like it in the SF bay area. DH, otoh, is worth quite a bit more in Silicon Valley. If I were willing to take an industry job we’d be doing quite well money-wise, even with housing costs. We’ve got friends out there with a tiny 800K home, and we envy them! (Despite our gorgeous 3000 sq ft 265K McMansion.) But so far my job is winning over income and greater wealth accumulation.

    • says

      It’s one of those chicken or the egg thingies.

      The reason why real estate is so expensive in Silicon Valley is b/c that’s where the high paying jobs are. Things are really booming in the Valley with all these startups and IPOs.

      IF you’re happy, then that’s all that matters. However, I would consider taking a chance and making those big bucks while you still have energy. You can then retire practically anywhere in the world and your dollar will go way farther!

      • says

        We’d rather retire in the SF bay area. Living someplace like we’re living now without a great job to go to every day sounds like torture.

        Heck, we could retire to DH’s home town (pop 3K and shrinking) right now but I would shoot myself probably at week 3 (since I know from vacation experience 2 weeks is all I can stand). More than anything else I need to keep busy. That’s easy someplace like SF or Mountain View with great libraries and great weather and awesome culture and nature and so on. Most other places it requires a job.

  16. Jay says


    I loved this article. I know I am late reading it but I had a question. If my wife and I fall in the $150-180 salary range, would you still recommend getting the most expensive home we can afford with the bank’s money. Depending on interest income, our AGI will vary but it will definitely be over $166,800.

    Should purchase a home within the highest amount possible?

    Disclaimer: Not taking your advice as gospel just want your opinion. I will seek professional advice for any decision I make. Thanks!

    • says

      Hi Jay,

      Welcome to my site. Without knowing your savings amounts, budget, rough age, and longevity to work, it’s tough to say.

      I’m hoping you have a good foundation already and if you can regularly make $200,000+ a year, then a $1 mil mortgage that costs $27,000-$35,000 a year in interest is not that bad at all.

      I think the housing market is in a Multi year recovery too.


      • Jay says

        Hey Sam,

        Thanks for the quick reply. Yea, I did leave that out, huh?!

        Savings in cash: $130K+
        Interest income (Prosper): Approx $3.75K/month(will go down if i do not re-invest)
        Debts: $0 besides necessities (rent)
        Age: 28

        After reading your articles, I am kicking my own ass for not buying where I have been living the past 3 years. I am active duty so I am transferring to Hawaii for at least 4 years (trying to extend to a 8 year tour) and now that I have a fresh start and a VA loan at my grasps was wondering if my wife and I should jump into a bigger house than planned.

        Combined Gross for 2011 was $185K. Both of us have zero debts, so after getting raped on our 2011 taxes, I started doing some research and landing on your blog. Want to deduct as much as possible while investing. Prosper taxes were pretty hefty too.

        Thanks for any advice and sweet blog. Already recommended to fellow military who need it like me. Many of us make decent tax free money and do not put it to good use.


      • Jay says

        I think my response didn’t go through…

        Thanks for the quick reply. Sorry about the vague post, I’ll fill you in on some of the details.

        Combined (Wife and I):
        Savings: $140K+ or so
        Gross Income from salary: 145K+
        Interest income (Prosper): 45K for 2011, but that may decrease if I do no re-invest the money in my savings back into Prosper
        Debts: Zero besides rent.
        Age: 28/27 (wife)
        Longevity: 10-14 more years active duty and then retire and work as a government contractor for however long I need to. Wife is a contractor and can work for 30+ yrs if needed.

        After reading a couple of your articles, I am kicking myself in the ass for not buying property where I have been stationed for the last three years.

        So now I get a fresh start. We moving to Oahu, HI next month for 4 yrs (possibly 8 if I can extend the tour) and can easily get my hands on a VA Loan or a different loan if needed. I know hawaii has some different real estate laws than the mainland but like I was reading about your SF properties. I wanna go all in and get a nice property in a high demand, high end area where long term rental is easy. Just do not know what the right mortgage range is.

        I have to take into account that eventually I have to move and we will have to purchase another property where we move next but I have to worry about covering both mortgages in case the rental property becomes vacant. Hence, trying to purchase in either a high end are or military community where it would rent easy. The military community would be on the cheaper end though, so the higher end properties look more attractive.

        So, would you recommend still shooting for the $1M mortgage or going lower to leave cushion for a second mortgage when I move again?

        Nice blog. Found yesterday and already recommended to a few peers.


        • says

          Hi Jay,

          Sorry you had to re-type or repaste your comment. My blog has a super sensitive spam system for all comments which need approval.

          I’m very impressed with your massive Prosper interest income! To get $45,000 in 2011 at a 10% return, does that mean you’ve got about $450,000 invested with them? I’d love to hear more about your strategy as amassing that much in Prosper at 28 is huge.

          Given you are in the military, your income is relatively safe and you will get a pension correct? If so, based on your income and savings, buying a house now seems to make a lot of sense. I’ve got a property in Oahu btw.

          I think you’ve got to focus on buying the best property, not so much getting a $1M mortgage. Find the best property with the right cash flow and then go from there. If the perfect property so happens to be worth $1-$1.2 million and you can afford it, then definitely consider.

          Also, given your assets, I suggest you sign up for Personal Capital and track your finances for free. It tracks your net worth, analyzes your portfolio, and keeps your spending in check.

          Cheers, Sam

  17. Jay says


    No worries; rookie mistake. I know now for future posts.

    As far as Prosper………I did some what risky, bullish investments with no real historic data to back it up. Basically, in 2010 I invested huge amounts per loans (up to $15K on some loans) and locked in old prosper rates of 30-35%. I cherry picked loans, conversed with the lenders who were mostly military and if I thought it was a good risk, I’d go for it. Then I started including repeat borrowers and did the same. Luckily for me, MOST of the large loans are current. Now, I automate the investments at $100 a loan or so with some pre set filters that in prosper’s short history have produces a 10-15% ROI. I am trying to be smart about it now and not just got with my gut (which ironically paid off this time) but all it takes is a few of the large ones to go bad and my ROI plummets.

    When I filed for taxes this year that $45K which was not net because I took $10K in losses but you know how the IRS does it…I had to report $45K as total income and could only write off $3K. This is how I found your blog…I have been looking for ways to pay less taxes.

    Thoughts so far:
    1- Open a business and invest into Prosper. This way I can write off all my losses and expenses it takes me to invest.

    2- Buy a house. At first I was going to go modest like most Americans with the best intentions but now I have been schooled by your articles and the comment threads and will get the best property location wise I can afford.

    3- ROTH IRA…WAS a thought until I got schooled (again) by some of your older articles. The comment thread was excellent and pretty funny at times; the numbers made sense though.

    My question would be should my wife and I max out 401K and the TSP (in my case for military)? I never opened one because I have always been drawn to real estate and having my money accessible as opposed to getting them at 55+. Is that the wrong mindset? I rather have real estate and other investments such as P2P. Although P2P now has IRA options, but again….same argument about age.

    My income is safe and will only go up with promotions (one coming in a few months). Yes, I will get a 50% of my taxable income or more depending on how many more years after 20 serve. In the field I am in, I can easily make substantially more after I retire (age 37) than I am now but who wants to keep working, right?!

    Ok, so your comments make me reflect and think I am worried too much about max’ing my deductions as opposed to getting the best property. Ok, so I am good affording my first property. When calculating for a second property, do you take into account your first mortgage as a monthly expense? I am confused whether I should get the best property under VA loan limits ($0 down) and shortly after purchase a second in Oahu with 20% down from my savings. Not planning to sell but just buy, hold and rent.

    When do you start moving on to more properties? When you build equity or are just when you have enough saved to cover mortgages 6-12 months?

    Where or what area do you have your property in Oahu at if you don’t mind me asking? In your experience which has been a sounder investment: SFH, condo or multi-family? Do you have a Realtor you recommend? I’ll be in paradise starting end of March this year.

    Sorry for the unload of questions. I have learned a lot just in the past two days on your site. Look forward to learning more. I am going to open a Personal Capital account to start tracking my current and future financial moves.

    Thanks for any input you wish to provide.

      • Jay says


        Yea they are some loaded questions! Thank you for your input and opinions so far. I will continue to familiarize myself with your site and look further into your services.

        Would you mind sharing what area of Oahu you purchased in? How long have you owned? Any periods of vacancy?

        Thanks again for the input and the knowledge you share on your blog.


  18. Jeff says

    how much should a $1mm mortgage cost? that is, if the gross amount is $1mm, what should you clear? would you have any suggestions on whose fees are the cheapest?

    • says

      Jeff, it depends on your income, but I’d check Quicken Loans for a free, no obligation quote. Given they don’t have the overhead as the bricks and mortars banks, I’ve found the to offer some of the lowest rates.

      I’ve seen 5/1 ARM Jumbo $1 million mortgages go for as low as 2.375% now. 30-year is closer to 3%.

  19. Stewart says

    Property taxes ruin this strategy for some states like in Texas. However, you can buy that awesome $500k house here.

      • Stewart says

        You are right, there is no income tax in Texas. Property tax depends on which school district you live in and it changes a little every year, but 2% is a fair estimate. $20k a year extra in taxes is huge. However, property taxes helped contribute to Texas real estate fairing well during the bubble because residents prefer cheaper appraised homes.

  20. Scott says


    I’ve just now stumbled across your site – great stuff so far. A topic I’d love for you to address is what will happen when the interest rates inevitably go back up to 5-10%. Obviously, if you financed at 2% and love your house, life is great. What about those looking to sell when the converse of what you describe above happens? i.e., when mortgage payments double and no one can qualify for a loan on $1 million+. I’ve spun this scenario out with several people with different views. Love to hear your thoughts.



    • says

      Hi Scott,

      Is 5-10% interest rates really inevitable? We’ve seen a 35 year decline in the 10year yield. What makes you think we’re suddenly going to shoot up 2-4x?

      If rates go up that much, I’ll take it because assets are inflating like crazy.


  21. kd8042 says

    Hi Sam,

    I’ve enjoyed spending the last several hours on your site reading through some of your articles. Very interesting stuff!

    I wanted to get your opinion on my situation.

    I am 29 years old and married and my wife plans to stay at home once we have kids (which we plan in the next year or two) so I want to base it 100% off of my salary. I have been with the same firm for 7 years and am now in a position where I make $125K salary and about $125K in bonus each year. It is a business development role so technically I could make as little as $150K in a year.

    After paying off my undergraduate, my wife’s graduate, and my MBA over the past few years, I have zero debt outside of about 15K left on my car.

    My savings are about 150K and I keep roughly 15K in my checking and the other 135K in a pretty stable mix of ETFs in my brokerage account.

    I also have about 150K in my 401K. Other than that, I have no real assets and have rented for a while.

    I am in a situation where I plan to move from Chicago to an area out East that has much lower taxes (i.e. ~$6K/year for a 700K house instead of about $12K/year for a 700K house in Chicago). Additionally, living expenses for the area are much lower.

    Based on my situation above, do you think that I would be smart to put in an offer on a 700K house that we like. We have been looking all around at places and got preapproved for 1M+ but feel like a 400-600K house is more appropriate given our current positioning.

    Also, we have been preapproved for 4.25% 30 year fixed piggy-back loan for really any price range that we would realistically look at.

    Thanks in advance and I enjoy your site!

  22. kd8042 says

    Hi Sam,

    I really have enjoyed reading through your website for the past few hours. I wanted to see if you have any thoughts on the following:

    I am a 29 year old male that is married and my wife is planning to stay at home so we will just go off of my salary. I make 125K salary a year and earn about 100-125K in commission in my business development role. The past two years, I’ve made about 250K each year.

    I have about 150K saved (15K in checking and about 135K in brokerage). Also, I have only 15K in debt (from a car purchase and it’s 2% APR). I paid off about 100K in tuition for my undergrad and graduate education and my wife’s graduate education.

    Based on my salary of 125K and the fact that I could make as little as 150K a year (likely 200-275K), do you think it’s silly to look at 700K houses?

    Also, I am moving from Chicago to a much less expensive area with low home taxes and zero sales tax. I like to factor that into my decision.

    Please let me know if you think 700K right now with a 4.25% 30 year fixed loan is a good decision and/or if you think it would be smarter and safer to hold back and/or to look at 400-600K range.

    Thanks in advance!

  23. Tron says

    Great website, lots of valuable info but my situation is a little different.

    Just married no children annual salary 600k Looking to buy 1st home. Looking at homes that cost 1.4M Property taxes about 35-40k a year! … Can I really afford this? I Have 10% to put down through special loan and still have another 75k. Cash in the bank.

    No debt other than student loans 1500 a month everything else paid off.

    I’m getting taken by Uncle Sam because I currently don’t have anything to deduct. Will a big mortgage and property taxes even make a difference at 600k?

    Any advice would help

    Is this to much debt to handle for A 1st home?

    • says

      600k is a great income. What about buying when you have at least 20% down plus a 10% buffer? I think you’ll feel better and you should be able to save that much soon.

      What do you do?

      $1.1 million mortgage isn’t a lot with rates below 4% for a mortgage and a 600k income.

      • Tron says


        Yes it should not take long to save but hate leasing for another 12 months. Would rather do something sooner than later to cut payed taxes if that’s worth anything and I hate throwing money away renting. I have no children and no property so no deductions. It’s painful. I practice medicine… I know very little about finances as most physicians. I also trust noone other than myself with my money and financial planing so that also makes it difficult for us.

        Read a few good books (millionaire next door, die broke ect.)that reccomend buying your 2 home 1st!

        What best way for someone like myself to pay less in taxes?


  24. Linda Schiegner says

    Loved your article on the $1M mortgage! I am building spec homes on Sanibel Island, which will be worth approximately $1-1.5M when complete. I have a cash backer, whose only worry is not selling it before completed. (Which is NOT going to happen!) But, let’s say it does….

    we have super upscale vacation rental programs here, and this home would rent for $5-6,000.00 per week in season and $4-5,000.00 out of season. (A lot of the homes don’t even reduce rents for the summer months, but I’m trying to be conservative). We have about an 85% occupancy rate. So, let’s say he finances $1M, what would a likely monthly payment be with taxes and interest? I am putting together a business plan for him, and he is a “numbers cruncher”, so I want to have as many facts and projections as possible in my presentation to him.

    • Tim says

      There a lot more lending programs for buyers withthe right income and assets for properties over $1 million dollars. Why? Lenders use stats and the stats show that this segment of buyers defaults the least so they are aggressively going after them. 90% financing up to $1.5M and no mortgage insurance are just some of the programs being offered. I know since I work in the industry.

  25. Nightvid Cole says

    How on earth is someone making $80k a year supposed to afford mortgage interest AND PROPERTY TAXES on a $2M home?

    Even at a modest property tax rate of 1.25%, on a $2 M home that is $25,000/year in property taxes. Add that to $26,000 in interest on a 2.6% mortgage of $1 M, this adds to $51,000/year.

    This means our $80,000/year earner has just $29,000/year for everything else, including payroll taxes of about $6,000/year and fed and state income taxes of at least $3000/year or so. This leaves $20,000/year for food, home maintenance, insurance, transportation, utilities, and everything else.

    You think someone earning $80k annually should basically buy so much house they live paycheck to paycheck on basically 1/4 of their income. You are nuts!!!!!!!!!!!!!!!!

    • Fred says

      Thank you for the only sane comment on here! Maybe I am just not the right audience for this guy’s “tips”, since it seems like I need to make 300k+ to even consider his advice!

      • says

        $250,000 is probably good enough with rates this low.

        But if you are confused, just re-read the last part of the title.

        Get motivated to earn more, or not. The analysis is based on my experience with multiple income and mortgage permutations.

  26. Shiv says

    Hi- my husband and I are considering a $1m mortgage. We own a home, which we will not be able to sell for what we bought. We may just try and rent it if we decide to move, since we’d be losing money by selling it.
    My question is about taxes- we get hit with AMT every year! We live in NY, make @ $450K a year and pay $14K a year in RE taxes. All our RE taxes and NYS income tax get taken away on AMT- ugh! We paid an extra $7K in AMT in 2014. Our mortgage interest was also phased out on our itemized dedcutions. We paid $105K in federal taxes and $27K in State in 2014- WTF!

    The home we are looking at has $30K in taxes :o
    My concern is I’ll never get the tax deduction for RE taxes and my mortgage interest will continue to be phased out the more we make. This makes it hard to believe we can afford this home. Please let me know your thoughts. I’ll also check out your taxes article.

  27. Tee says

    What advice would you give someone with a financial windfall of multiple millions in order to minimize the tax fallout? I have heard charitable trust, charitable foundations but I am also interested in real estate, living well in retirement and philanthropy.

Leave a Reply

Your email address will not be published. Required fields are marked *