A $400,000 loan over 30 years, rate by rate
Principal and interest only; taxes, insurance and PMI come on top. The last column is the interest paid over the whole term if the loan runs to the end.
| Rate | Monthly payment | Change from the row above | Total interest over 30 years |
|---|---|---|---|
| 4.00% | $1,910 | $287,478 | |
| 4.50% | $2,027 | +$117 | $329,627 |
| 5.00% | $2,147 | +$121 | $373,023 |
| 5.50% | $2,271 | +$124 | $417,616 |
| 6.00% | $2,398 | +$127 | $463,353 |
| 6.50% | $2,528 | +$130 | $510,178 |
| 7.00% | $2,661 | +$133 | $558,036 |
| 7.50% | $2,797 | +$136 | $606,869 |
| 8.00% | $2,935 | +$138 | $656,621 |
Each half point adds roughly $128 a month on this loan, and a full point from 6 to 7 percent adds $263. Over the term, the step from 6 to 7 percent costs $94,683 more in interest, a sum larger than many down payments. The mortgage calculator produces this row for any rate, term and loan, with the full schedule behind it.
One point at three loan sizes
The dollar effect scales with the loan. From 6 to 7 percent:
| Loan | Payment at 6% | Payment at 7% | Difference per month | Difference over 30 years |
|---|---|---|---|---|
| $200,000 | $1,199 | $1,331 | $132 | $47,341 |
| $400,000 | $2,398 | $2,661 | $263 | $94,683 |
| $600,000 | $3,597 | $3,992 | $395 | $142,024 |
The rule that falls out: one point of rate is about 11 percent on the payment around the 6 percent level, whatever the loan size, and the percentage grows slightly at lower rates and shrinks at higher ones.
What a point does to buying power
Turn the question around: keep the payment fixed at $2,398, the 6 percent payment on $400,000, and ask what loan it supports at each rate.
| Rate | Loan the same $2,398 payment buys | Compared with 6% |
|---|---|---|
| 4.00% | $502,330 | +$102,330 |
| 4.50% | $473,312 | +$73,312 |
| 5.00% | $446,741 | +$46,741 |
| 5.50% | $422,376 | +$22,376 |
| 6.00% | $400,000 | |
| 6.50% | $379,422 | −$20,578 |
| 7.00% | $360,468 | −$39,532 |
| 7.50% | $342,985 | −$57,015 |
| 8.00% | $326,835 | −$73,165 |
Every point of rate removes roughly a tenth of the loan a given payment can carry. That is the mechanism by which rate changes move house prices and why buyers who are budgeting from a monthly figure should run the home affordability calculator at the rate they are actually quoted, not the one in last month's news.
The term is the other lever
At 6 percent, the $400,000 loan costs $2,398 a month over 30 years and $3,375 over 15. The shorter term costs $977 more a month and saves $255,776 of interest, because the balance falls far faster. A one-point difference in rate and a change of term are of the same order of magnitude on the payment, which is why lenders quote 15-year loans at lower rates: the two effects stack. The loan calculator compares terms at any rate, and the amortization guide shows why the early payments are mostly interest in the first place.
Using the numbers
- Comparing lenders: a quarter point on $400,000 is about $65 a month at 6 percent. Weigh it against the fees; the APR folds both into one figure.
- Buying down the rate: a discount point costs 1 percent of the loan and lowers the rate by a lender-set amount; the mortgage points guide shows the break-even.
- Refinancing: the monthly saving from the table, divided into the closing costs, gives the months to break even; the refinance calculator does it with the remaining term taken into account.
- Rate locks: while a purchase is pending, the table says what a half-point move would do to the payment, which is the number to compare with the cost of locking.
Frequently asked questions
How much does 1 percent change a mortgage payment?
On a $400,000 30-year loan, going from 6 to 7 percent raises the principal-and-interest payment from $2,398 to $2,661, about $263 a month, and the interest over the full term from $463,353 to $558,036. As a rule of thumb, one point of rate is roughly 10 percent on the payment at today's rate levels, and the dollar effect scales with the loan size.
Is a quarter point worth refinancing for?
A quarter point on $400,000 is about $65 a month at 6 percent. Whether that pays depends on the closing costs and how long you keep the loan: $4,000 of costs divided by $65 a month is about 62 months to break even. The refinance calculator runs that for your numbers.
Does a higher rate change how much house I can afford?
Yes, by more than people expect. The payment that buys a $400,000 loan at 6 percent buys only about $360,468 at 7 percent and $326,835 at 8 percent, because the same monthly amount has to cover more interest. Each point of rate costs roughly a tenth of the loan amount in buying power.
Why is the total interest so sensitive to the rate?
Because the payment barely reduces the balance in the early years, and interest is charged on the balance. A higher rate means more of every payment is interest, so the balance falls more slowly, so more interest accrues next month. Over 30 years the effect compounds into the five- and six-figure differences in the table.
Is the payment linear in the rate?
Almost, over the range that matters. From 4 to 8 percent each point adds a little more than the one before, but the steps are close to equal, so you can estimate between the rows of the table. The relation to the loan amount is exactly linear: double the loan, double the payment at the same rate.