Why Mortgage Interest Rates Matter
Your mortgage interest rate determines how much you pay in interest over time. Even a 0.5% rate change can significantly impact monthly payments and total loan costs.
How Interest Rates Affect Monthly Payments
Let’s compare how different interest rates change a 30-year, $300,000 mortgage.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 5.0% | $1,610 | $279,767 |
| 5.5% | $1,703 | $313,119 |
| 6.0% | $1,799 | $347,514 |
| 6.5% | $1,898 | $382,934 |
A 1.5% increase from 5.0% to 6.5% raises monthly payments by $288 and adds $103,167 in total interest!
How Interest Rates Impact Loan Affordability
If rates rise, homebuyers may afford less house for the same monthly budget. Here’s an example of how much home a $2,000 mortgage payment can buy at different rates:
| Interest Rate | Max Loan Amount |
|---|---|
| 5.0% | $375,000 |
| 5.5% | $350,000 |
| 6.0% | $325,000 |
| 6.5% | $300,000 |
A 1.5% rate increase reduces home affordability by $75,000 while keeping the same $2,000 monthly budget.
Using a Mortgage Calculator
To see how different interest rates impact your payments, try our Mortgage Calculator.
“A lower mortgage rate means lower payments and huge savings over time. Always compare rates before committing!”
— Sarah Thompson, Mortgage Expert