Mortgage rates can have a significant impact on your purchasing power when you are considering buying a home. Even a small shift in mortgage rates can affect your monthly mortgage payment and your overall affordability.
For example, let's say you are considering purchasing a $300,000 home with a 20% down payment, which is $60,000. With a 6% interest rate on a 30-year fixed-rate mortgage, your monthly mortgage payment would be around $1,439. However, if the interest rate increases to 7%, your monthly mortgage payment would increase to $1,597. This is an increase of $158 per month, which may not seem like a lot, but it adds up to an additional $56,880 over the life of the loan.
Conversely, if the interest rate drops from 6% to 5.5%, your monthly mortgage payment would decrease to $1,352, which would save you $87 per month, or $31,320 over the life of the loan.