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$197 a Month: The Difference a Year Makes in Interest Rates

  • April 17th 2014

by Lark Turner

$197 a Month: The Difference a Year Makes in Interest Rates: Figure 1

One year ago, the average on a 30-year fixed-rate mortgage was 3.41 percent. On Thursday morning, Freddie Mac reported 4.27 as the average on this type of loan. So, how does that change in rates impact your mortgage payments?

To get a sense, UrbanTurf took a home with a $500,000 purchase price and assumed our buyer has excellent credit. Using the rates from today and last year, we examined how monthly mortgage payments changed. In each case, we assumed the buyer put down a 20 percent down payment. Note that these include principal and interest, but not the cost of insurance or taxes.

Here are the two scenarios:

April 2013: The average mortgage rate was 3.41 percent.

Monthly mortgage payment: $1,776
Total outlay on mortgage (monthly payment x 360 months): $639,360

April 2014: The average mortgage rate was 4.27 percent.

Monthly mortgage payment: $1,972
Total outlay on mortgage (monthly payment x 360 months): $709,920

So, the difference between a rate of 3.41 percent and 4.27 percent is about $197 a month or $70,560 over the life of the loan.

We’re tracking the path of long-term rates since January 2010 in this chart:

$197 a Month: The Difference a Year Makes in Interest Rates: Figure 2

See other articles related to: mortgage rates, the difference a year makes

This article originally published at https://dc.urbanturf.com/articles/blog/197_a_month_the_difference_a_year_makes_in_interest_rates/8372.

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