Here’s How Much You’ll Pay Monthly on a $500k Mortgage
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The Fed cut rates by 50 basis points after September’s FOMC meeting, which could bring down mortgage rates.
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While the Fed doesn’t directly control mortgage rates, monetary policy impacts mortgage lenders and borrowing rates because every rate cut makes it less expensive for banks to borrow money. And if you’re looking to apply for a home mortgage or are considering refinancing, you’ll want to know how much your monthly payments could be.
Keep reading for a closer look at a typical payment for a $500,000 mortgage and see how rate cuts impact the housing market.
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Current Mortgage Rates
When the Fed cut rates on September 18, this was the first reduction in four years. Analysts at J.P. Morgan expect rates to be cut by another 50 basis points at the next meeting in early November, while other analysts expect a cut of 25 basis points. Either way, the belief is that rates will continue to drop.
According to data compiled by Zillow, the current average mortgage rate for a 30-year fixed mortgage is 5.80%, and the current national average on a 15-year fixed mortgage rate is 4.98%. We’ll use these numbers to calculate how much you’ll pay on a $500,000 mortgage. For the sake of these calculations, we won’t include property taxes, insurance and other fees you would be paying as a homeowner.
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How Much You’ll Pay on a $500k Mortgage With 10% Down
For a home costing $500,000, a 10% down payment would be $50,000, meaning that your mortgage would be $450,000.
Here’s what the payments would be after rate hikes, according to Zillow’s calculator:
Monthly payment with 10% down for a 15-year fixed mortgage at 4.98%: $3,763
Monthly payment with 10% down for a 30-year fixed mortgage at 5.80%: $2,640
If you had taken out a mortgage before the rate cut, here’s what your payments would’ve been:
Monthly payment with 10% down for a 15-year fixed mortgage at 5.86%: $3,345
Monthly payment with 10% down for a 30-year fixed mortgage at 6.44%: $2,827
How Much You’ll Pay on a $500K Mortgage With 20% Down
A 20% down payment would be $100,000, which leaves you with a mortgage of $400,000. Here’s what your payments would look like after the current rate hikes:
Monthly payment with 20% down for a 15-year fixed mortgage at 4.98%: $3,159
Monthly payment with 20% down for a 30-year fixed mortgage at 5.80%: $2,347
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If you had taken out a mortgage before the rate cut, here’s what your payments would’ve been:
Monthly payment with 20% down for a 15-year fixed mortgage at 5.86%: $3,345
Monthly payment with 20% down for a 30-year fixed mortgage at 6.44%: $2,513
These calculations show the importance of minor changes in interest rates when it comes to your monthly payments. For example, if you had 20% set aside for your down payment and waited a few weeks for a 15-year fixed mortgage, you could’ve saved $186 on your monthly payments.
However, there’s also the risk that the home you wanted to bid on had a price increase caused by higher demand. This is why it’s crucial that you always consider your personal situation when making an important financial decision.
Saving Money on Your Mortgage Payments
While rate cuts from the Fed are a positive sign for potential homeowners, it’s important to remember that personal circumstances also dictate the interest rate the lender offers you.
Here are two ways you can save money on your mortgage payments:
Analyze your financial situation. You should start by reviewing your debt-to-income (DTI) ratio to see how much you’re spending on your monthly debts compared to your earnings. This will help you determine what kind of home you can afford, as a lender doesn’t want your debt to get too high.
Improve your credit score. Lenders will review your credit score to determine how trustworthy you can be with your finances. A higher credit score will improve your chances of getting approved for a mortgage with favorable terms. You’ll want to take some time to pay down your balances and review your credit report for any possible errors.
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This article originally appeared on GOBankingRates.com: Here’s How Much You’ll Pay Monthly on a $500k Mortgage
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