What is the effect on total cost if mortgage interest rates increase or decrease by 1%?

I thought it might be helpful to illustrate the difference between a 4.5% and a 5.5% interest rate. This is a question that is frequently asked when discussing financing. For the sake of example, let’s use a 150,000 mortgage with a 30 year term. The principle and interest payment for the 4.5% loan will be 760.02 per month and the 5.5% loan will be $851.68 per month. This is a difference of $91.66 monthly.

It’s staggering when you do the long term math. If you pay or save an extra $91.66 per month for 360 months, that turns into an additional $32,997.60 over the life of the loan.

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