Mortgage Rate Sensitivity

Small rate moves have outsized effects because interest compounds over a long term. As an illustration, on a 320,000 dollar loan the principal and interest run about 2,022 dollars a month at 6.49 percent versus about 2,129 dollars at 7.0 percent, a difference of roughly 107 dollars a month for the same loan. Those figures are dated and for illustration only.

Over a 30 year term that monthly gap adds up to tens of thousands of dollars. It also shrinks your buying power, since a higher payment means a smaller loan fits the same income. Because rates can move week to week, it helps to stress-test your budget at a rate above today’s, so a quote that drifts upward before you lock does not break your plan. Actual payments vary by rate, term, and lender.