Mar 27, 2017
With the current 30-year fixed home mortgage interest rate hovering around 4 percent, many home shoppers are locking in their interest rate before it goes up again. Historically the rates are still very low but it’s a good idea to calculate the cost of even a one percent rise in current rates as the additional cost adds up to a large sum over the life of a 30-year loan.
The table above shows the difference in monthly payment amounts as the interest rate goes up from 4 percent to 5 percent and again to 6 percent. But the real eye opener is the difference paid in total interest over the life of the loan. A $300,000 30-year fixed rate mortgage at 5 percent costs $64,158 more than the same mortgage at 4 percent. If the interest rate goes up to 6 percent, the total cost of the loan goes up $131,906 over 30 years.
Most people focus on the monthly mortgage payment amount, but if your mortgage goes up $200 per month, that would equal $72,000 over the life of the loan.
These figures are only approximate, and the final amount of a home mortgage will be determined by additional factors such as credit rating. If you are limited by the amount per month you can pay for your mortgage, then the total cost of the home you can afford to buy goes down considerably as the interest rate goes up.
Bear in mind that you will also need to add your home insurance and property taxes into the equation. Use the McKee Homes New Home Financing page mortgage calculator to get an idea of what your total monthly payments would be for a traditional loan. If you are considering buying a home within the next year or so, it would be a good idea to lock in your interest rate as soon as possible to get more home for a lot less money. If you are not already working with a lender, please contact one of our preferred lenders to find out the best interest rates currently available and get prequalified.
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