How Interest Rates Affect Payments

Of course, the biggest topic in real estate news lately is mortgage interest rates. Are they up? Are they down? Are they continuing to rise? The answer seems to change with the wind. But one thing that always leaves people scratching their heads is just how monthly mortgage payments are affected by changing interest rates. Here’s a handy guide looking at clear cut numbers!

Your fixed monthly payment is heavily determined by a blend of the purchase price and current mortgage interest rates. Here are the price breakdowns for homes at different price points with varying interest rates. 

$250,000 Purchase Price

6.0%: $1,498 payment
6.5%: $1,580
7.0%: $1,663

As you can see, there’s a nearly $165 difference per month with a full percentage point interest rate difference. 

$450,000 Purchase Price

6.0%: $2,697
6.5%: $2,844
7.0%: $2,993

As you can see, there’s a $295 difference per month with a full percentage point interest rate difference. 

$800,000 Purchase Price

6.0%: $4,796
6.5%: $5,056
7.0%: $5,322

As you can see, there’s a $526 difference per month with a full percentage point interest rate difference. 

There’s a reason interest rates are all anyone can talk about. They play a huge role in determining what you can actually afford each month. Remember to shop within your price range!