Your mortgage payment is highly sensitive to interest rate changes. On a $350,000 loan, here is how different rates affect your monthly payment (principal and interest only): 6.5% = $2,212, 7.0% = $2,329, 7.5% = $2,449. Each 0.5% change in rate changes your payment by approximately $117 to $120 per month.
Over the life of a 30-year loan, the difference between 6.5% and 7.5% on a $350,000 loan is over $85,000 in total interest. That is a significant amount of money that could go toward other financial goals.
This sensitivity is why it pays to shop among lenders and improve your credit score before applying for a mortgage. Even a 0.25% difference in rate can save you thousands over the life of the loan.
Patrick's Take
I show every client a rate sensitivity table during our first consultation. I want them to see exactly how much each rate scenario changes their payment. It helps them understand why we focus on their credit score and debt-to-income ratio before we even start looking at homes. A 760 credit score might get you a full percentage point lower than a 620 score. That is hundreds of dollars per month. Work on your credit before you buy.
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Patrick Kevin Fagan
Loan Officer and Realtor, AXEN Realty LLC
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