How does Interest Rate affect you? How different is 5% versus 5.1%?

Its better to have lower interest rates duh. But accessing how that affects your real estate decision requires you to look at the numbers.

Let's take a look at an example. You are buying a $1 million home. You are placing 20% down so the loan amount you are taking is $800,000. You are taking a 30 year loan payment. At 5% interest, your monthly mortgage would be $4295.

At 5.1% interest, your monthly mortgage would be $4343. At this price point each 0.1% delta is about $50 a month. This may seem small, but the real difference is the interest paid over the life over the loan. At 5% interest, at the end of the life of the loan, you will have paid $746k in interest.

At 5.1% interest, at the end of the life of the loan, you will have paid $764k in interest.

A $18k difference at the end of the loan. These deltas are what you can carry in your head when you are comparing options. Very often, there are factors that may push you to take a loan with a higher percentage. This math can give you a nice rule of thumb as you plan your real estate purchase. A point in mortgage rates is about $50 dollars a month.