From a $350,000 Condo to a $1 Million House, The Difference a Year Makes in Interest Rates

• November 2nd 2018

by Nena Perry-Brown

One year ago, the average rate for a 30-year fixed-rate mortgage was 3.94 percent. This week, Freddie Mac reported 4.83 percent as the average on this type of loan, an 89 basis point jump over 12 months. This change will effect how much new homebuyers pay on their monthly mortgage, so UrbanTurf took a closer look at how the rise in mortgage rates will impact buyers at three price points.

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First, we took a look at how a homebuyer with excellent credit would fare purchasing a $350,000 home. Using the current rates and rates from last year, we examined how monthly mortgage payments have changed. For the price point, we looked at buyers who made a 20 percent down payment, and also buyers who made a 3.5 percent down payment.

November 2017: The average mortgage rate was 3.94 percent.

Monthly mortgage payment (20 percent down): $1,327
Total outlay on mortgage (monthly payment x 360 months): $477,756

Monthly mortgage payment (3.5 percent down): $1,601
Total outlay on mortgage (monthly payment x 360 months): $576,292

November 2018: The average mortgage rate is 4.83 percent.

Monthly mortgage payment (20 percent down): $1,474
Total outlay on mortgage (monthly payment x 360 months): $530,690

Monthly mortgage payment (3.5 percent down): $1,778
Total outlay on mortgage (monthly payment x 360 months): $640,148

For buyers making a 20 percent down payment on a $350,000 unit, the difference between a rate of 3.94 percent and 4.83 percent is $147 per month, or $52,934 over the life of the loan.

On the other hand, for buyers making a 3.5 percent down payment, the difference between a rate of 3.94 percent and 4.83 percent is $177 per month, or $63,856 over the life of the loan.

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Next, we took a look at how homebuyers with excellent credit would fare purchasing a $700,000 home, comparing payments based on last year's rates and this week's rates. 

November 2017: The average mortgage rate was 3.94 percent.

Monthly mortgage payment (20 percent down): $2,654
Total outlay on mortgage (monthly payment x 360 months): $955,508

Monthly mortgage payment (3.5 percent down): $3,202
Total outlay on mortgage (monthly payment x 360 months): $1,152,583

November 2018: The average mortgage rate is 4.83 percent.

Monthly mortgage payment (20 percent down): $2,948
Total outlay on mortgage (monthly payment x 360 months): $1,061,384

Monthly mortgage payment (3.5 percent down): $3,556
Total outlay on mortgage (monthly payment x 360 months): $1,280,293

For buyers making a 20 percent down payment, the difference between a rate of 3.94 percent and 4.83 percent is $294 per month, or $105,876 over the life of the loan.

On the other hand, for buyers making a 3.5 percent down payment, the difference between a rate of 3.94 percent and 4.83 percent is $354 per month, or $127,710 over the life of the loan.

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Last, we took a look at how homebuyers with excellent credit would fare purchasing a $1 million home. 

November 2017: The average mortgage rate was 3.94 percent.

Monthly mortgage payment (20 percent down): $3,792
Total outlay on mortgage (monthly payment x 360 months): $1,365,012

Monthly mortgage payment (3.5 percent down): $4,574
Total outlay on mortgage (monthly payment x 360 months): $1,646,546

November 2018: The average mortgage rate is 4.83 percent.

Monthly mortgage payment (20 percent down): $4,212
Total outlay on mortgage (monthly payment x 360 months): $1,516,262

Monthly mortgage payment (3.5 percent down): $5,081
Total outlay on mortgage (monthly payment x 360 months): $1,828,991

For buyers making a 20 percent down payment, the difference between a rate of 3.94 percent and 4.83 percent is $420 per month, or $151,250 over the life of the loan.

On the other hand, for buyers making a 3.5 percent down payment, the difference between a rate of 3.94 percent and 4.83 percent is $507 per month, or $182,445 over the life of the loan.

This article originally published at https://dc.urbanturf.com/articles/blog/the-difference-a-year-makes-in-interest-rates-at-three-price-points/14650.