Mortgage Rates

When financing a home, you probably already know that you should look for low interest rates. However, you may not fully understand just how much mortgage rates matter when it comes to saving your money now and in the future.

Before randomly selecting a lender and settling for whatever mortgage rates that lender offers, you should learn more about current mortgage rates and how to save money by securing low interest rates.

Current Mortgage Rates and Total Home Cost

If you are in the market for a new home then it is essential that you understand how much mortgage rates affect the total cost of your home. By simply imputing the numbers into a total mortgage cost calculator, you can quickly see that securing low interest rates when financing your home purchase is pertinent to saving you a significant amount of money throughout the duration of your loan.

Let’s assume you can obtain a fixed interest rate for the entire 25 years for 3.5% or 3.0%. Obviously you would probably opt for the 3.0% interest rate, but let’s take a look of just how much money that 0.5% will save you throughout the duration of your loan.

If the home you are interested in costs $400,000 and you obtain a 25 year loan for 3.5% with a down payment of $30,000, the total cost of your home would be $630,747.29. On the other hand, if you select a 3.0% interest rate the total cost of your home would be $599,051.44. That’s over $31,000 less than you would pay for financing at the higher rate.

In short, low interest rates matter.

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Saving Money with Low Interest Rates

When financing your home, a low mortgage rate not only affects the total cost of your home, but also helps determine your monthly payments, which can be quickly worked out with a payment calculator. Using the same example above and a payment calculator you will quickly see that your monthly mortgage payment will vary depending upon the mortgage rates put into the payment calculator. 

According to the payment calculator, for 3.5%, your principal and interest payment would be $1847.30 in comparison to $1,751.01 if your interest rate is 3.0%, which is a difference of $96.29 each month.

As you can tell by the output of the total mortgage cost calculator and payment calculator, when you are considering financing a home it is absolutely essential that you examine current mortgage rates. The examples above illustrate how current mortgage rates are directly related to your ability to save money.

The moral of the story is this: If you are financing a home, shop around and make sure you find a mortgage lender with the lowest current mortgage rates and a good reputation.  This small amount of research can result in a large benefit.