Mortgage rates just hit 7.40%. Here's what that does to a $400,000 loan.
The 30-year average is more than a point above last year. On a $400,000 loan, that's about $294 more a month.
The average 30-year fixed mortgage rate rose to 7.40% this week, from 7.28% a week earlier and 6.30% a year ago, according to Freddie Mac's weekly survey published October 8. The 15-year average rose to 6.73%, from 5.53% a year ago.
Why it matters
Rate moves hit the monthly payment directly. On a $400,000, 30-year loan, principal and interest come to about $2,770 a month at 7.40%, compared with about $2,476 at last year's 6.30%. That's roughly $294 more a month, or about $3,500 a year, before taxes and insurance.
Over the life of the loan
Total interest at 7.40% comes to about $597,000, compared with about $491,000 at 6.30%. That's more than $100,000 extra for the same house.
For rental buyers
Every extra dollar of mortgage payment has to come out of rent. A rental that just broke even on a $400,000 loan at last year's rate now needs about $294 more in monthly rent, or a bigger down payment, to cover the same loan.
What you can control
- Shop lenders. Freddie Mac's chief economist, Sam Khater, says getting multiple quotes can potentially save borrowers thousands over the life of a loan.
- Price a 15-year loan. The rate is lower, at 6.73%, but the payment on $400,000 is about $3,535 a month.
- Use your own quote, not the average. Freddie Mac's survey tracks borrowers with good to excellent credit who put 20% down, so many buyers will be quoted more.
Payments are principal and interest only, rounded. This is information, not financial advice.
