How Interest Rates Effect Mortgage Payments

People often ask me about how the interest rates impact the monthly mortgage payment for a home.  When the interest rate changes, how much of an impact does that have on the monthly payment?  You will find that for each eighth of a difference in the interest rate, for example you go from 4.25% to 4.375% and you have a loan amount at $400,000, that is going to change your monthly payment by about $30 per month.  You can now multiply this.  If your interest rate were to go up .25%, your monthly payment would go up approximately $60 per month.  Where this is going to start to add up is economists with Freddie Mac are estimating that by the beginning of 2015, we are going to start seeing interest rates around 5% to 5.25%.  This is only an estimate right now.  If we see the interest rates move from 4.25% to 5.25%, one full percent, you’re going to see your monthly payment go up approximately $240 per month.  Again, this is on a loan size of $400,000 and is based on a 30 year loan term.  This is equivalent to about a 10% difference in home price buying power.  If you were looking to keep the same exact payment you had at 4.25%, and rates have moved to 5.25%, you would need to purchase a home 10% less in value.  If you have a loan at $800,000, you would just double the monthly payment differences I have given to you.  This should give you an idea of how much of a difference you will see in your monthly payment with each eighth increment in your interest rate.

For additional information on these programs, please contact Julie Ozanich at 858-369-7510.  All loans are subject to qualifying and may have loan size restrictions. NMLS #479603.

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With a mission to provide a higher standard of mortgage lending services, Julie began her career in mortgage banking in 1990.  To date, Julie has successfully closed over $1 billion in mortgage loans and helped over two thousand customers achieve their mortgage goals.  Program availability may differ slightly in different states.  Terms may vary.  Subject to change without notice. Bank of Manhattan is not affiliated with nor endorses The Carmel Valley Life. NMLS# 401422.