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Are you in the market for a new home and wondering how much the monthly mortgage affordability will differ based on the interest rate? Look no further! In this blog post, we’ll dive into the difference in monthly payments between a $500,000 home with an interest rate of 5%, 5.5%, and 6%.
Interest Rates at 5%
Let’s start with the lowest interest rate of 5%. With a 30-year fixed-rate mortgage, your monthly payment would come out to roughly $2,631. This includes both the principal and interest payments. You also need to factor in homeowners insurance, property taxes, and any PMI. This is assuming you escrow these other charges.
Interest Rates at 5.5%
Moving on to a 5.5% interest rate, your monthly payment would increase to approximately $2,796.
Interest Rates at 6%
Finally, let’s examine the impact of a 6% interest rate. Your monthly payment would jump up to $2,964, but over the life of the loan, As you can see, the interest rate plays a crucial role in determining your monthly affordability and overall cost of the loan. Just a 1% increase in the interest rate, from 5% to 6%, results in a monthly payment increase of $333 and a cost increase of $126,920 over the life of the loan.
Paying Over Ask vs Higher Rate
Another thing to be aware of is with lower rates, comes more buyer pressure. And while we haven’t seen bidding wars in months, we may see them as rates start to drop. Between 5.5% and 6%, the difference in P & I is $168/month. But bidding $5,000 more to secure a lower interest rate on your home is equivalent to covering nearly 30 monthly payments with the savings from the $168 difference in monthly affordability
In conclusion, it’s crucial to take your time when considering the interest rate for your mortgage affordability. While a lower interest rate means lower monthly payments and overall cost, a higher interest rate leads to higher monthly payments and an overall more expensive loan. Shop around and compare rates from various lenders to find the best option for your budget. Don’t wait, take control of your financial future today!
Want to Know What You Can Afford: Go Here
Want to See What That Number Gets You: Go Here
