Most first-time buyers spend months researching homes, neighborhoods, and mortgage rates. But they spend almost no time preparing for the financial reality of owning a home.
A practice mortgage payment is a monthly deposit into your own savings account, sized to match the full cost of owning the home you want, mortgage, taxes, insurance, and upkeep included. It proves you can live with the payment before you commit to it, and it builds your down payment at the same time.
There are several financial considerations associated with buying a home, including maintenance, taxes, insurance, and local fees. Adding a practice mortgage payment to your monthly expenses can help you prepare to pay your mortgage when you buy your home.
Here’s everything you need to know about practicing mortgage payments and what you need to do to commit to this plan.
How Do You Make a Practice Mortgage Payment?
To start making practice mortgage payments, identify a realistic target home. Then, calculate its true monthly carrying costs and deposit that amount into a dedicated savings account every month for 12 months.
What you’re doing is simulating the payment discipline required to own a home. If you do this for 12 months or more, you’ll have a better idea of what you can afford. More importantly, you’ll have a growing down payment in your savings account as well.
This exercise is technically to determine whether the type of home you want makes sense for your finances. However, you could learn that you overestimated what you can afford.
Either way, you know more than you did previously. Even if you need to search for something less expensive, imagine if you had ended up buying a home you couldn’t afford.
Worst-case scenario: You save yourself from a lot of stress and anguish down the road. Here’s a more detailed breakdown of the process:
Step 1: Find a Realistic Model Home
Find a home that sold in the past six months that would work as your starter home. It needs to be realistic, matching the size, location, and school district you’d be open to living in.
This is your model home. You’re not buying it; you’re just using it as a financial benchmark.
If you can’t find a good model home in your area, you can search for a realistic option in a nearby area. Just keep in mind that the more realistic the local costs are for your model home, the more realistic your model payments will be, so don’t look too far away. The costs associated with a home in Wichita Falls, Texas, are very different from those of a house in Beverly, Massachusetts.
Step 2: Calculate Your Costs
Next, you need to calculate how much you’ll pay each month with your practice mortgage payment. That means determining the carrying costs for your model home. Carrying costs include your mortgage, but other costs are bundled into it as well.
Unfortunately, it can be easy to underestimate your carrying costs. If you use an unreliable mortgage calculator, round down on insurance, or skip the monthly cost of PMI because you’d rather not think about it, the amount you put away each month stops being realistic.
We’ll walk through exactly how to calculate carrying costs below. The most important thing to remember right now is that the cost must be accurate.
Step 3: Open a Savings Account and Start Depositing
Finally, you need to open a dedicated savings account and deposit your practice payment into it every month without exception. Ideally, the account won’t be for emergencies or your next care purchase. It’s best to use it as a single-purpose account and save for the down payment on your future home.
If you can sustain this commitment for 12 months, then you will have pressure-tested your financial fitness for the home you want.
Tip: Subtract Current Housing Costs
It may not be feasible for you to set aside an entire mortgage payment on top of your existing financial obligations. If that’s the case, subtract your current rent or mortgage payment from the amount you save each month.
Your practice payment only needs to cover the difference between what you currently pay each month for housing and what you’ll pay in the future.
Calculating the Carrying Costs of Your Practice Mortgage Payment
A monthly mortgage payment is not just principal and interest. Each practice mortgage payment will include taxes, insurance, and potentially PMI or association fees. Here is how to build it accurately.
Assessor Database
Start with property taxes. Look up the home in your city or town’s online assessor database using the property address. You’re looking for two numbers: the building valuation and the land valuation. Add them together to get the total assessed value.
From the assessor’s homepage, find the current residential tax rate. Multiply the assessed value by that rate to get the annual tax bill, then divide by 12 for the monthly figure.
While you’re in the database, click through to the property’s “Field Card” or “Record Card.” You’ll find the floor plan, lot dimensions, and a record of permitted additions or upgrades. This is all useful context as you evaluate the home.
Let’s Buy City Hall
Some towns and cities make this process easier than others. The City of Beverly, Massachusetts, provides a detailed map of all the properties in the city. You can click on a property to see its total assessed value, then calculate the yearly taxes based on the local tax rate.
Above, we have selected 191 Cabot Street, which just so happens to be City Hall. The city has already calculated the total assessment of the land and its buildings for us, valued at $2,834,100.
According to the Beverly City Assessor page, the tax rates per $1,000 of assessed value for fiscal year 2026 are:
- Residential – $10.81
- Commercial – $20.98
Let’s imagine City Hall as a private residence with a tax rate of $10.81 per $1,000 of assessed value:
- $2,834,100 divided by $1,000 equals $2,834.10.
- $2,834.10. multiplied by $10.81 equals $30,636.62
- $30,636.62 divided by 12 equals $2,553.05
So, $2,553.05 is how much the owner of City Hall (or any home valued at the same amount) would have to pay each month in property taxes alone. If you want a lower, more realistic home option, a home assessed at $500,000 would cost $450.42 in property taxes each month.
Different Types of Home Values
One important note: Assessed value is not the same as appraised value, fair market value, or the price the home sold for. No one in the industry treats assessed value as a proxy for market value. It’s simply the number the town uses to calculate your tax bill.
Home Insurance
To factor home insurance into your practice mortgage payment, you need to get a current insurance quote for the property.
There are plenty of online tools to compare home insurance quotes. That said, we’d encourage you to work with an independent insurance broker rather than a direct carrier. A local broker like Carroll Steele Insurance in Gloucester, MA, can often find better coverage at a better price than most online tools.
Home insurance premiums vary based on the home, its location, the homeowner, and other factors. They have also risen sharply over the past few years.
Whatever number you find, use the higher end of the range in your calculations. You want to practice with a realistic figure, not an optimistic one.
Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the purchase price, you will have to pay for private mortgage insurance each month in addition to your regular mortgage payment. PMI is an additional monthly premium that protects the lender in the event of a default. It’s the cost of borrowing before you’ve built enough equity to cross the 20% threshold.
We’ve written a detailed article about PMI to walk you through how it works, so we won’t cover all of it again. But if you follow that link, you can use our PMI calculator to generate a working estimate and add it to your monthly total.
If your down payment already clears 20% of the total sale price, you’re good to go. You won’t need to pay PMI.
Condo and Homeowners’ Association Fees
If you’re buying a condominium, you’ll have to include a monthly condo fee in your practice mortgage payment. These vary widely depending on the building. A small association might charge $200 a month, while a full-service building with amenities and professional management can run $600 or more.
Find the actual fee for your model property and add it in.
Some single-family homes also sit within an HOA. Typically, those on a private road or with a shared amenity like a pond or common green space. We’ve written about the pros and cons of joining an HOA as well, if you’re interested.
HOA fees tend to be lower. They typically cover services like road plowing and long-term repaving costs. If your model home has no HOA, then you don’t have to factor in this cost.
Principal and Interest (P&I)
Your principal and interest payments are the largest pieces of your practice mortgage payment. Mortgage rates determine how much interest you owe each year, and they are partially market-based. That means they are subject to change before you buy.
For that reason, we encourage you to call or email us rather than relying on the national average mortgage rate for your calculations.
You may be tempted to use a mortgage calculator as well. They can be useful, but they are better to use at the end of your mortgage journey rather than the beginning.
State Incentive Programs
Many first-time buyers in Eastern Massachusetts and southern New Hampshire qualify for state incentive programs and government-sponsored mortgages that carry below-market interest rates. If your income is above the program thresholds or you have an excellent credit score, you probably won’t qualify for these programs.
Either way, you should know which situation you’re in before you start practicing with a number for interest.
Applying Your Mortgage Rate
Once you have a current rate, apply it to your expected loan amount to calculate the monthly P&I payment. To keep things simple: a home priced at $800,000 with a 10% down payment results in a $720,000 loan. At a rate of 6.25%, that’s a monthly P&I payment of roughly $4,433.
To be safe, you can also add a half-percent buffer to your rate on either side to calculate a range. That way, you can factor in any rate movement between now and when you’re ready to buy.
Interest is calculated gradually based on your remaining principal, so how much you pay each month changes slightly over time. If you want to be exact about your monthly P&I payment, you need to use the standard amortization formula.
It’s… a bit more complicated:
M = P · [ r(1 + r)ⁿ / ((1 + r)ⁿ − 1) ]
In the formula above:
- M = Your total monthly mortgage payment.
- P = Your principal loan amount (how much you borrow).
- r = Your monthly interest rate assigned by your lender (Historically, they average about 7.23%, but they can fluctuate).
- n = The number of payments you’ll make over the loan’s lifetime. If you have a 30-year fixed mortgage, this number will be 360.
If you don’t want to do all the math by hand, you can use a basic online amortization calculator. If we use this formula for our $720,000 loan, then use a 0.5% buffer to calculate with rates of 5.75% and 6.75%, we get a monthly P&I payment range of $4,201.72 to $4,669.91.
Apply Your Practice Mortgage Payment
You’re now ready to calculate and apply your practice mortgage payment. Keep in mind that the most difficult part of a practice mortgage payment isn’t the mathematics involved; It’s keeping your hands out of the bank account you set up.
Try making it unavailable on your banking dashboard. Don’t associate any cards or checks with it. The less visible it is, the less tempting it will be to raid it when an unexpected expense comes up.
Give the account a name that will help you keep your eye on your goal. If you’re the type of person who responds to a little inspiration, something like “Dream Home” might be effective. The point is to make it feel real and specific, not like a generic savings bucket.
By the 15th of each month, deposit your full practice payment. You can set up an auto-transfer if you think it will be too hard to remember.
Take the First Step
That’s it! Practice mortgage payments are a pretty simple concept, but a lot goes into them. If you still have questions about rates, choosing a realistic model home, or maintaining financial discipline, don’t hesitate to call us at 978-922-4446 for a friendly chat.
You can also email us through our Contact Us page.