How do rate changes affect your payment?

When interest rates rise, you may be concerned about how that affects your affordability of your monthly payment.

Let’s break down how a rate shift affects your monthly payment on a 30 year fixed loan.

For every $100,000 you borrow, a 1% change in the interest rate will shift the monthly mortgage by about $60/mo.

That means on a $500,000 loan, a 1% change in the interest rate moves the monthly payment by about $300.


For example:

A $500,000 loan at 4% is $2,387.08/mo

A $500,000 loan at 5% is $2684.11/mo — the two payments are $297.04 apart.

If the rate rises by one percent, to have an approximately equivalent payment you will need to borrow $55,000 less.

A $445,000 loan at 5% is $2,388.86/mo – essentially the same as a $500,000 at 4% at $2387.08/mo.

To break this down further – if rates increase by .5%, you’ll borrow $27,500 less to have the same monthly payment as before.


I hope this helps in understanding how rate changes affect your monthly payment!

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