How do interest rates affect my home purchase?How do interest rates affect my home purchase?
When you’re paying interest on a home loan, it’s amortized over the life of the loan. That means that in the beginning of your loan term, most of your mortgage payment will go toward paying off interest. Over time, a larger percentage of your monthly payment will be applied to your loan’s principal balance.
Nothing affects a home’s affordability more than interest rates. After all, we live with the monthly payment, not the amount of the loan.
Look at the chart below depicting the monthly payments for 30 year loans of $400,000 and $750,000.
As you can see, just a 1% change in the interest rate can have a drastic effect on the monthly payment.
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