15-year mortgage

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National mortgage rates jumped for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans moved higher.

The Federal Reserve has raised rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.

”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”

Rates as of May 29, 2023.

These rates are marketplace averages based on the assumptions indicated here. Actual rates available on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Monday, May 29th, 2023 at 7:30 a.m.

You can save thousands of dollars over the life of your mortgage by getting multiple offers. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates

30-year fixed-rate mortgage rises, +0.15%

The average rate for the benchmark 30-year fixed mortgage is 7.19 percent, up 15 basis points over the last seven days. Last month on the 29th, the average rate on a 30-year fixed mortgage was lower, at 6.88 percent.

At the current average rate, you’ll pay a combined $678.11 per month in principal and interest for every $100k you borrow. That’s $10.12 higher compared with last week.

The 30-year mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:

  • Lower monthly payment. Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower, more affordable payments spread over time.
  • Stability. With the 30-year, you lock in a consistent principal and interest payment. That predictability lets you plan your housing expenses for the long term. Keep in mind: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power. Because you have lower payments, you can qualify for a bigger loan and a more expensive house.
  • Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like building an emergency fund, contributing to retirement or college tuition, or saving for home repairs and maintenance.
  • Strategic use of debt. Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year mortgage with a smaller monthly payment can allow you to save more for retirement.

15-year mortgage rate trends upward,+0.19%

The average rate for the benchmark 15-year fixed mortgage is 6.61 percent, up 19 basis points since the same time last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $877 per $100k borrowed. The bigger payment may be a little more difficult to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.

5/1 adjustable rate mortgage moves upward, +0.13%

The average rate on a 5/1 adjustable rate mortgage is 6.00 percent, adding 13 basis points over the last 7 days.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate mortgages. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.00 percent would cost about $600 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Current jumbo mortgage rate moves upward, +0.11%

The current average rate you’ll pay for jumbo mortgages is 7.20 percent, up 11 basis points from a week ago. This time a month ago, the average rate on a jumbo mortgage was below that, at 6.96 percent.

At the current average rate, you’ll pay a combined $678.79 per month in principal and interest for every $100,000 you borrow. That’s an additional $7.43 per $100,000 compared to last week.

Recap: How mortgage rates have shifted

  • 30-year fixed mortgage rate: 7.19%, up from 7.04% last week, +0.15
  • 15-year fixed mortgage rate: 6.61%, up from 6.42% last week, +0.19
  • 5/1 ARM mortgage rate: 6.00%, up from 5.87% last week, +0.13
  • Jumbo mortgage rate: 7.20%, up from 7.09% last week, +0.11

Interested in refinancing? See rates for home refinance

Current 30 year mortgage refinance rate trends upward, +0.13%

The average 30-year fixed-refinance rate is 7.25 percent, up 13 basis points over the last week. A month ago, the average rate on a 30-year fixed refinance was lower, at 6.99 percent.

At the current average rate, you’ll pay $682.18 per month in principal and interest for every $100,000 you borrow. That’s $8.80 higher compared with last week.

Where mortgage rates are headed

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing mortgage options

The 30-year fixed-rate mortgage is the most popular loan for homeowners. This mortgage has a number of advantages. Among them:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

Determining how much house you can afford

If you’re not sure how much of your income should go toward housing, follow the traditional 28/36 percent rule. Most financial advisers agree that people should spend no more than 28% of their gross income on housing (i.e., your mortgage payment or rent), and no more than 36% of their gross income on total debt, including mortgage payments, credit cards, student loans, medical bills and the like. Calculate how much house you can afford and determine your monthly payments.

Keep reading:

Featured lenders for today, May 29, 2023

Source: bankrate.com

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About our Mortgage Rate Tables: The above mortgage loan information is provided to, or obtained by, Bankrate. Some lenders provide their mortgage loan terms to Bankrate for advertising purposes and Bankrate receives compensation from those advertisers (our “Advertisers”). Other lenders’ terms are gathered by Bankrate through its own research of available mortgage loan terms and that information is displayed in our rate table for applicable criteria. In the above table, an Advertiser listing can be identified and distinguished from other listings because it includes a “Next” button that can be used to click-through to the Advertiser’s own website or a phone number for the Advertiser.

Availability of Advertised Terms: Each Advertiser is responsible for the accuracy and availability of its own advertised terms. Bankrate cannot guaranty the accuracy or availability of any loan term shown above. However, Bankrate attempts to verify the accuracy and availability of the advertised terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. Click here for rate criteria by loan product.

Loan Terms for Bankrate.com Customers: Advertisers may have different loan terms on their own website from those advertised through Bankrate.com. To receive the Bankrate.com rate, you must identify yourself to the Advertiser as a Bankrate.com customer. This will typically be done by phone so you should look for the Advertisers phone number when you click-through to their website. In addition, credit unions may require membership.

Loans Above $726,200 May Have Different Loan Terms: If you are seeking a loan for more than $726,200, lenders in certain locations may be able to provide terms that are different from those shown in the table above. You should confirm your terms with the lender for your requested loan amount.

Taxes and Insurance Excluded from Loan Terms: The loan terms (APR and Payment examples) shown above do not include amounts for taxes or insurance premiums. Your monthly payment amount will be greater if taxes and insurance premiums are included.

Consumer Satisfaction: If you have used Bankrate.com and have not received the advertised loan terms or otherwise been dissatisfied with your experience with any Advertiser, we want to hear from you. Please click here to provide your comments to Bankrate Quality Control.

Source: thesimpledollar.com

Apache is functioning normally

Save more, spend smarter, and make your money go further

“Apparently, I’m a financial unicorn,” says Lance Cairns of Georgia, Vermont. Cairns has worked his whole adult life to build a credit score higher than 800, a feat achieved by only 5.7% of all Americans, according to CreditKarma.com. That’s not exactly mythical, but is quite rare.

Cairns has maintained excellent credit since he began building his credit history in his early 20s. His 811 FICO score paid off when he secured low-interest rates on his mortgage and credit cards. But can someone who has accrued substantial revolving debt or made poor financial decisions in the past achieve such a score? Experts – and people who’ve done it – say yes.

Perks of the Credit Elite

Cairns was recently approved for a credit card with a 5.15% interest rate – lower than that of many fixed-rate conventional mortgages. The APR, or annual percentage rate, on his other major credit card is 7.25%. Thanks to his high credit score, Cairns also saves money on his car insurance.

Julie White, another member of the credit elite (her score is 813), enjoys multiple money-saving perks, as well as bragging rights. “My husband’s score is 793 and I lord those 20 points over him,” she jokes.

To start with, White recently obtained a 15-year mortgage with a 4.5% interest rate. “We also got lower fees on some closing costs associated with the bank, and lower homeowners’ insurance costs. Apparently, people with excellent credit are less likely to burn the house down,” she quips.

From 600 to 800+


Unlike Cairns, who has always had impeccable credit, White had a credit score in the low 600s in her early 20s. “When I was making less money, it was harder. I regularly carried balances until about 10 years ago,” she says.

Since debt utilization makes up 30 percent of your credit score – the second biggest factor after timely payments – carrying a balance can keep you out of the credit-elite category.

Once White was able to pay off those balances, her credit score spiked. She keeps it high by using Outlook reminders and online bill-paying so she never misses a payment. “Most of our household bills go on a cash-rewards credit card I pay off each month. I write only a few checks. This reduces the chance of a slipup,” she says.

Randy Mitchelson, owner of the Daily Dollar Newsletter personal finance blog, says White’s experience isn’t unusual. “Time heals all credit issues,” he says. “Assuming the consumer has perfect credit behavior for a 24-month period following bad credit behavior, he can earn a dramatically different score.”

Taking Your Credit from Excellent to Elite

Once you hit the 750 mark, it takes careful credit management to make the jump to 850. Some experts say there’s no real difference in 50 points when you reach the top of the pack, but others say that in today’s lending environment, every point helps. “A FICO score of 750 is great, but it’s no longer a guarantee for the best rates available,” says Wayne Sanford of YourCreditSpecialist.com.

Sanford points to the all-important debt-to-available-credit ratio as one way to give your score a nudge. “If you have a perfect payment history for six to 12 months, you may be able to get a credit line increase just by asking,” he says. That way, a credit inquiry won’t negatively affect your score, but you can lower your debt-to-credit ratio to gain points. “Credit unions and smaller banks are more likely to do this based on your credit history alone,” Sanford advises.

Another way to raise your score is to develop a variety of credit – a mixture of revolving and installment loans. “A good ratio is two revolving loans for every installment,” Sanford says. “So if you have a mortgage and a car loan, you should have four credit cards.”

Of course, you shouldn’t buy a new car just to improve your credit score. Sanford suggests adding your name to a spouse’s existing installment loan – another move you can make without a credit inquiry.

Credit inquiries account for 10 percent of your FICO score, so it’s a good idea to limit them if you intend to join the credit elite. “Retail store cards we apply for to get a discount, cell phone plans, auto loans, apartment rentals… these all count against our FICO score,” says Denise Winston, a money and time-saving expert. “I limit mine to no more than two per year.”

In general, the rules to join the credit elite are simple: make timely payments, keep your credit utilization up to about 25 to 35 percent of your available credit, and minimize credit inquiries.

In addition to the cost savings available to members of the credit elite, there’s another key benefit: peace of mind. The higher your score, the easier it is to stay within the “excellent” category should you make a small mistake. Mitchelson explains: “One late payment may bring you from 810 to 760 and keep you in the ‘A’ credit range, whereas a 720 person with a late payment will fall into the 600s and out of the ‘A’ range,” he says.

For more tips on improving your credit score, check out MintLife‘s Credit Score Primer.

Can You Increase Your Credit Score to 850 is provided by Experian.com

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Source: mint.intuit.com

Apache is functioning normally

Mortgage interest rates sunk on all loan terms from a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans all dropped.

The Federal Reserve has lifted rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.

”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”

Rates as of May 9, 2023.

These rates are marketplace averages based on the assumptions indicated here. Actual rates displayed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Tuesday, May 9th, 2023 at 7:30 a.m.

>>See historical mortgage rate trends, from the 70s to today

You can save thousands of dollars over the life of your mortgage by getting at least three rate quotes. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates

Today’s 30-year mortgage rate dips, -0.01%

The average rate for a 30-year fixed mortgage is 6.87 percent, down 1 basis point over the last week. This time a month ago, the average rate on a 30-year fixed mortgage was unchanged, at 6.87 percent.

At the current average rate, you’ll pay principal and interest of $656.59 for every $100k you borrow. That’s $0.67 lower, compared with last week.

How do I view personalized 30-year mortgage rates?

Use the loan widgets on this page or head to our primary rates page to see what kind of rates are available in your situation. You just need to give us a little information about your finances and where you live. With that data, Bankrate can show you real-time estimates of mortgages available to you from a number of providers.

15-year mortgage falls,-0.03%

The average rate for the benchmark 15-year fixed mortgage is 6.23 percent, down 3 basis points over the last seven days.

Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $856 per $100k borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM rate eases, -0.01%

The average rate on a 5/1 adjustable rate mortgage is 5.79 percent, sliding 1 basis point since the same time last week.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 5.79 percent would cost about $586 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Current jumbo mortgage rate moves lower, -0.02%

The average jumbo mortgage rate today is 6.94 percent, a decrease of 2 basis points over the last seven days. This time a month ago, the average rate on a jumbo mortgage was unchanged, at 6.94 percent.

At the average rate today for a jumbo loan, you’ll pay $661.28 per month in principal and interest for every $100,000 you borrow. That’s a decline of $1.34 from last week.

Summary: How interest rates have shifted over the past week

  • 30-year fixed mortgage rate: 6.87%, down from 6.88% last week, -0.01
  • 15-year fixed mortgage rate: 6.23%, down from 6.26% last week, -0.03
  • 5/1 ARM mortgage rate: 5.79%, down from 5.80% last week, -0.01
  • Jumbo mortgage rate: 6.94%, down from 6.96% last week, -0.02

Interested in refinancing? See rates for home refinance

Today’s 30-year mortgage refinance rate goes up, +0.02%

The average 30-year fixed-refinance rate is 7.01 percent, up 2 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was lower, at 6.97 percent.

At the current average rate, you’ll pay $665.97 per month in principal and interest for every $100,000 you borrow. That’s an increase of $1.34 over what you would have paid last week.

Where are mortgage rates headed?

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing different mortgage terms

The 30-year fixed mortgage is the most popular loan for homeowners. This type of loan has a number of advantages, including:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

Are mortgage rates going up?

Throughout 2021, mortgage rates are expected to begin rising again. The National Association of Realtors expects rates to average 3.1% and the Mortgage Bankers Association (MBA) says mortgage rates will average 3.3% in 2021. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019’s average rates. Many experts say it could be years before mortgage rates return to their pre-pandemic levels.

Sources:

  • National Association of Real Estate Editors
  • Freddie Mac Federal Home Loan Mortgage Corporation

What comes next:

Featured lenders for today, May 9, 2023

Source: bankrate.com

Apache is functioning normally

When you’re considering applying for a mortgage, one of your top questions is probably “What is the monthly payment going to be?”

For a 100K mortgage, the payment on a 30-year loan at 7% interest would be $665.30. For a 15-year mortgage loan term, the payment increases to $898.83, which helps you pay off the loan sooner and pay less in interest costs over the entire loan.

Your own loan will depend on a number of factors, including but not limited to fluctuating interest rates. Here’s what goes into a 100K mortgage, what income is required to get one, and what your payments would look like over the life of the loan.

Total Cost of a 100K Mortgage

The total cost of a 100K mortgage goes beyond the monthly payment. There are upfront costs and ongoing, long-term costs to consider, all of which affect how much house can you afford.

Upfront Costs

Upfront home loan costs can include:

•   Closing Costs: There are costs you need to pay to get a mortgage, but they are not a part of the original loan. These are known as closing costs and include things like the mortgage origination fee, the cost of an appraisal, attorney fees, title fees, taxes, prepaids, and other expenses. With the average closing cost on a new home adding between 3% and 6%, that works out to $3,000 to $6,000 on a 100K mortgage.

•   Down Payment: Unless you are able to obtain a 0% down payment loan, you’ll need some money to afford the down payment on a 100K mortgage loan.

The average down payment on a home is 13%, as per the National Association of Realtors®. This works out to $13,000 on a $100,000 home.

If you don’t quite have this amount, there are other types of mortgage loans that offer low down payment options. 3% and 3.5% are common, which would come out to $3,000 and $3,500 for the down payment on a 100K home.

Long Term Costs

Here are the ongoing costs of a mortgage loan:

•   Interest. The biggest expense you’ll have over the life of the loan is interest. Interest costs are huge, especially in an economy with higher annual percentage rates (APRs). You’ll pay more in interest than you do in principal if you keep the mortgage loan for the whole 30-year loan term.

For a $100K mortgage with a 30-year term and 7% APR, the interest costs total $139,508.90.That’s on top of the $100,000 original loan amount. Adding the two together, you’re looking at paying $239,508.90 for the original 100K mortgage. Take a look at our mortgage payment calculator or the amortization table further down if you’re more curious about this amount.

•   Escrow. You may pay for taxes and insurance through your escrow account every month. This expense doesn’t go away, even when you pay off your mortgage. The amount of tax and insurance varies by state and policy.

Estimated Monthly Payments of a 100K Mortgage

Payments on a 100K home will ultimately be determined by your loan term and interest rate. And the interest rate is determined by a number of factors. Of course, the Fed’s rate matters, but so too do such aspects as:

•   Credit score. A good credit score can afford you a lower interest rate on your mortgage.

•   Down payment. Generally, putting down a larger down payment affords you a lower interest rate.

•   Home location. There are certain areas where you may be offered a lower interest rate just because of where you live.

•   Loan amount. If you need a larger loan, such as a jumbo loan, you’ll usually see a higher interest rate. The same can be true of much smaller homes, such as tiny homes.

•   Interest rate type. If you choose a loan with an adjustable APR, you may initially have a lower interest rate.

•   Loan type. You’ll see different interest rates based on what loan type you’re using. Examples include VA loans, FHA loans, and a USDA loan which may offer a lower (or no) down payment as well as lower interest rates.

•   Loan term. Choosing a mortgage term that’s shorter can help you score a lower interest rate.

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Recommended: First-Time Homebuyer Guide

Monthly Payment Breakdown by APR and Term

It’s helpful to see what potential mortgage loan payments on a 100K mortgage may be, adjusting for term length and APR variance. Keep in mind these costs do not include escrow items, such as taxes or insurance.

APR Monthly Payment on a 30-Year Loan Monthly Payment on a 15-Year Loan
3.5% $449.04 $714.88
4% $477.42 $739.69
4.5% $506.69 $764.99
5% $536.82 $790.79
5.5% $567.79 $817.08
6% $599.55 $843.86
6.5% $632.07 $871.11
7% $665.30 $898.83
7.5% $699.21 $927.01
8% $733.76 $955.65
8.5% $768.91 $984.74
9% $804.62 $1,014.27
9.5% $840.85 $1,044.22
10% $877.55 $1,074.61

How Much Interest Is Accrued on a 100K Mortgage?

Each month, your payment is split into principal and interest payments. Those interest payments go to the bank as payment for lending you money. Principal payments go toward the original loan amount and pay down the loan.

The longer the loan term, the more you’ll pay in overall interest. For a 100K mortgage on a 30-year term with a 7% APR, the interest costs total $139,508.90 on top of the original loan.

On a 15-year term with the same parameters, the interest costs are a more modest $61,789.09. Yes, your monthly payments are higher, but the difference between a 15 vs. 30 year mortgage with 7% APR is significant.

Recommended: Home Loan Help Center

100K Mortgage Amortization Breakdown

The amortization of a 100K mortgage shows how much of your monthly payment pays off the loan each month.

You can see in the early years of your mortgage, more of your monthly payment goes toward interest, and very little of your loan is paid off. In later years, more of the payment will go toward the principal.

Year Monthly Payment Beginning Balance Total Amount Paid Interest Principal Ending Balance
1 $665.30 $100,000.00 $7,983.60 $6,967.81 $1,015.79 $98,984.19
2 $665.30 $98,984.19 $7,983.60 $6,894.39 $1,089.21 $97,894.95
3 $665.30 $97,894.95 $7,983.60 $6,815.64 $1,167.96 $96,726.96
4 $665.30 $96,726.96 $7,983.60 $6,731.21 $1,252.39 $95,474.55
5 $665.30 $95,474.55 $7,983.60 $6,640.66 $1,342.94 $94,131.59
6 $665.30 $94,131.59 $7,983.60 $6,543.59 $1,440.01 $92,691.55
7 $665.30 $92,691.55 $7,983.60 $6,439.49 $1,544.11 $91,147.41
8 $665.30 $91,147.41 $7,983.60 $6,327.86 $1,655.74 $89,491.65
9 $665.30 $89,491.65 $7,983.60 $6,208.17 $1,775.43 $87,716.19
10 $665.30 $87,716.19 $7,983.60 $6,079.81 $1,903.79 $85,812.38
11 $665.30 $85,812.38 $7,983.60 $5,942.19 $2,041.41 $83,770.95
12 $665.30 $83,770.95 $7,983.60 $5,794.61 $2,188.99 $81,581.94
13 $665.30 $81,581.94 $7,983.60 $5,636.38 $2,347.22 $79,234.69
14 $665.30 $79,234.69 $7,983.60 $5,466.70 $2,516.90 $76,717.75
15 $665.30 $76,717.75 $7,983.60 $5,284.75 $2,698.85 $74,018.87
16 $665.30 $74,018.87 $7,983.60 $5,089.64 $2,893.96 $71,124.88
17 $665.30 $71,124.88 $7,983.60 $4,880.45 $3,103.15 $68,021.68
18 $665.30 $68,021.68 $7,983.60 $4,656.10 $3,327.50 $64,694.16
19 $665.30 $64,694.16 $7,983.60 $4,415.56 $3,568.04 $61,126.09
20 $665.30 $61,126.09 $7,983.60 $4,157.62 $3,825.98 $57,300.08
21 $665.30 $57,300.08 $7,983.60 $3,881.03 $4,102.57 $53,197.49
22 $665.30 $53,197.49 $7,983.60 $3,584.46 $4,399.14 $48,798.32
23 $665.30 $48,798.32 $7,983.60 $3,266.46 $4,717.14 $44,081.14
24 $665.30 $44,081.14 $7,983.60 $2,925.44 $5,058.16 $39,022.95
25 $665.30 $39,022.95 $7,983.60 $2,559.78 $5,423.82 $33,599.10
26 $665.30 $33,599.10 $7,983.60 $2,167.69 $5,815.91 $27,783.17
27 $665.30 $27,783.17 $7,983.60 $1,747.26 $6,236.34 $21,546.80
28 $665.30 $21,546.80 $7,983.60 $1,296.45 $6,687.15 $14,859.60
29 $665.30 $14,859.60 $7,983.60 $813.02 $7,170.58 $7,688.98
30 $665.30 $7,688.98 $7,983.60 $294.64 $7,688.96 $0.00

What Is Required to Get a 100K Mortgage?

When you’re applying to qualify for a mortgage, lenders look for a few key things to approve your application.

•   How much debt you will be carrying. Lenders look for your monthly payment to be lower than 28% of your gross monthly income. A 100K mortgage payment at 7% interest on a 30-year term is $665.30. For this payment to be less than 28% of your monthly income, your monthly income needs to be over $2,376, assuming you have no debt. This turns into a $28,512 yearly salary requirement to afford a 100K mortgage payment.

If you have debt, the calculation changes a little bit. Your lender will add your monthly debts to your projected monthly mortgage payment. These two numbers added together need to be less than 36% of your monthly income. This calculation a lender does is known as the debt-to-income ratio, or back-end ratio.

•   Credit score. It’s advisable to have a credit score of 620 or higher when applying for a mortgage loan.

•   Consistent work history. If you are unemployed, self-employed, or have recently changed jobs, lenders may be less likely to approve your loan. They may worry about your having a steady enough income to make your payments.

The Takeaway

A 100K mortgage will have a monthly cost that varies depending on such factors as the loan’s interest rate, the term of the loan, and whether it’s a fixed- or variable-rate loan. By understanding more about how the cost of a mortgage is calculated, plus the related costs, you can be better prepared for the milestone of being a homeowner.

When you’re ready to apply for a mortgage, SoFi will be there for you. Our rates are competitive, and we offer flexible loan terms and down payment options (as little as 3% for first-time homebuyers) to suit your needs. The online application simplifies the process, and our dedicated Mortgage Loan Officers can help you every step of the way.

See how smart and simple a SoFi Mortgage Loan can be.

Photo credit: iStock/AndreyPopov

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

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What is the true cost of home ownership? A closer look at which is best between a 30 year fixed mortgage rate or a 15 year fixed mortgage rate…

Have you ever been a situation where you wanted to buy something really bad? Maybe it was something that you wanted really bad, but you really didn’t quite need it. 

Just for hypothetical sake, let’s say you really need (I’ll say want) the new Apple iPad and with its nice entry prices of $499.  You have to buy it, but unfortunately, you don’t have the cash right now, so you buy it on credit. 

Everyone else is doing it, why not you?

Needing a line of credit you head to the first lender and they strike you a deal that will allow you to pay it back over 3 months of $200 per month. 

Over the 3 months you’ll pay a total of $600 of which $100 is interest.  Not sure you if you’re getting the best deal you shop around and head to the 2nd lender. 

The 2nd lender entices you with a sweet offer that only makes you pay $125 month but you do so for a 6 month period.  The grand total you’ll pay is $750 of which $250 is interest. 

Although with the second lender you pay less per month, it takes you longer to own your iPad and you end up paying one and a half times what it is actually worth!  How bad do you really need it?

Which Loan Would You Choose?

If a similar situation, would lender would you borrow from? As I’m sure you can tell, there is a lot of similarity in buying a home. When you’re deciding between a 15-year mortgage and a 30-year mortgage, be sure to consider and weigh all the pros and cons before making your decision.

Pros in Choosing A 30 Year Mortgage Rate Over 15 Year Mortgage Rate

In general, the reason most homebuyers take out a 30-year mortgage is because they cannot afford (or think they cannot afford) a higher monthly payment.

But if you can find a way to make a 15-year mortgage rate work within your budget, it could really pay off in the long run.

You would own your home sooner and pay less for it (ultimately), and you would probably also lock in your mortgage at a lower interest rate.

For example … Let’s say you want to buy a house for $300,000. If you took out a 30-year fixed rate mortgage at 6.5%, you’d pay around $1900 per month. In the end, you will have spent $300,000 on your house, and $382,633 on interest. That’s a total of $682,633 … over twice the price of your home.

If you bought the same house with a 15-year fixed rate mortgage at 6.0%, your monthly payment would be about $2,532.

However, at the end of 15 years, you will have spent only $455,682. That’s $300,000 on the house and only $155,682 on interest.

That’s $226,951 less than with the 30-year mortgage!

What could you do with an extra $226,951?

That “extra” money could be invested, used to fund your child’s education, used to renovate the house, etc.

It’s up to you to decide if the additional money paid each month is worth the long-term payoff.

But remember … the term is shorter, too. Imagine owning your home before your kids start college.

You’re only sacrificing monthly for 15 years, and then … no more payments. It’s all yours!

Cons in Choosing 15 Year Mortgage Rate Over 30 Year Mortgage Rate

Being over zealous in paying down your home mortgage does have it risks.  The first

What are the downsides? Well, the most obvious downside is that the monthly payment is higher.

This can mean significantly altering your spending habits.

Another downside: by paying less interest, you’ll get less of a tax deduction.

Making an Extra Payment

While the attraction of having your house paid off in 15 years sounds exciting, it’s a pipe dream for many.  My wife and I had toyed with the idea of choosing a 15-year mortgage for our new house, but when we started to crunch the numbers we realized that we were dreaming and dreaming big.

Our solution was to make an extra payment per year. 

For example, if you use the example above, a $300,000, 30-year fixed-rate mortgage at 6.5% and if we contribute just $200 extra each month (0r $2400 per year) toward the principle,  we could potentially pay off our mortgage nearly 7 years sooner and save over $100,000 in interest.

For us,  we get the benefit of paying off the mortgage sooner while not having to be tied down to a higher monthly payment in case we have any unexpected jolts to our income later on in life.  Typically, this is the same method that I would suggest to most. 

There’s a lot of value in flexibility and leaving your options open.


Source: goodfinancialcents.com

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Last Updated on February 25, 2022 by Mark Ferguson

When considering either a 15 or 30 year loan for investing, most people choose the 15 year loan. 15-year loans may appear to save money over 30-year loans because they have a lower interest rate, but I would much rather have the flexibility of a 30-year loan. Buying rental properties is a great investment, especially when you are able to use a mortgage to buy the properties and still get great cash flow. Many investors will get a 15-year mortgage because the rates are a little lower and they can pay off the properties quicker. I use a 30-year loan when I buy my rental properties because I get more cash flow and I can make much more money buying more properties than I can be paying off loans.

Why is a short term loan better?

The biggest advantage of a 15-year mortgage is the interest rate is less than a 30-year loan. The difference in rates changes daily and varies with different banks, but a 15-year loan is usually about .5 percent less than a 30 year fixed mortgage. With a lower interest rate, you are paying more towards the principal and less towards interest.

Some people think the biggest advantage of 15-year loans is the shorter length of the loan. I don’t agree because you can pay a 30-year loan off early if you want too. You will have a higher interest rate, but .5 a percent is not a huge rate difference, especially when you consider how much you can make buying more properties.

Are mortgages front-loaded with interest?

A lot of people want to pay off their loans faster because they think the interest is front-loaded on a mortgage. That means you pay more interest at the start of the loan compared to the loan amount than you do at the end of the loan. The truth is you do pay more interest at the beginning of the loan, but not because the interest is front-loaded, but because the loan amount is higher. If you have a 5% interest rate on your mortgage, 5% of your payment is paid to interest. You pay less money to interest as time goes on because the loan amount decreases.

How much do you save with a lower interest rate?

If you get a 15 year, $100,000 loan on a rental property at a 4 percent interest rate, the payments will be $740 a month (check out bank rate mortgage calculator for calculating mortgage payments). Over the 15 years of that loan, you will pay $33,143 in interest. With a 30 year loan at 4.5 percent interest, the total amount paid in interest over the life of the loan will be $82,406.

On the surface, it looks like you are saving almost $50,000 by getting a 15-year loan. However, you are paying interest over 30 years on one loan and over 15 years on the other, which is deceiving. The payment on a 30-year loan is only $507 a month, which is $233 less a month than the 15-year loan. If you were to take that $233 a month and put it back into the 30-year loan each month, the 30-year loan would cost $39,754 in interest and be paid off in less than 17 years. It definitely costs a little more to have a higher interest rate, but over 15 years that is only $550 more each year. As time goes by that money is worth less and less due to inflation.

I go over specific numbers on 15 versus 30-year loans in the video below:

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Why do banks push 15-year mortgages?

You may hear banks and lenders push 15-year loans on the radio and social media all the time! I always wonder if the 15-year loan is so much better for consumers and worse for banks, why are the banks trying to convince people to get 15-year loans? There are a couple of reasons.

  • The banks want people to refinance their loans because they make more money every time someone gets a new loan. You pay 2 to 5% in closing costs on a new loan and the bank or lender gets most of that money.
  • Most banks do not want their money locked up for 30 years. There is a reason they offer a lower interest rate on 15-year loans because they want more people to get 15-year loans. 30 years ago interest rates were more than 10%! Now they are less than 5%. The banks know that the lower the rate is, the shorter-term loan they want. They don’t want their money tied up in long-term loans.

The banks and lenders push 15-year loans because they make more money with short-term loans.

Is a 15 or 30 year loan better?

You will pay less interest on a 15-year loan than a 30-year loan. However, you are paying a higher payment every month on the 15-year loan. If you add up the payment savings with the 30-year loan, you save $2,796 each year and $41,940 over 15 years by getting the 30-year loan.

That extra money can be used for many things that will make you much more money than that $6,000 in interest you save. You can save up the cash flow to buy more rental properties. You can use the money to build an emergency fund. You could also pay extra to the mortgage and if you ever need the extra money later, you can stop putting extra money into the mortgage.

If you have nothing to invest that money into, it might make sense to get the 15-year loan. If you want to keep buying rentals and build your empire, the best bet is to get a longer-term loan and buy as many rentals as you can now.

Something else to consider is that inflation makes money worth less in the future. The graph below shows how much more money a 15-year loan costs you at the beginning of the loan when inflation is considered. It takes until year 24 or longer to start saving money with the 30-year loan.

It takes more than 24 years before you start saving money with a 15-year loan when inflation is considered!

Why does a 15-year loan make it harder to buy more rentals?

Another huge factor when considering whether to use a 15 or 30-year loan, is qualifying for more properties. When banks qualify an investor, they will look at debt to income ratios. A 15-year loan will have a higher payment and increase your monthly debt payments. The higher your loan payments are, the less cash flow you will have, and it will be harder to qualify for new loans. Many banks will only count 75 percent of your rental income when qualifying an investor for a loan. Even if you are cash flowing with a 15-year loan, if you can only count 75 percent of the rental income, you may show a loss each month. If you have many rental properties showing a loss, it will be very hard to qualify for new loans.

A 30-year loan with its lower payments will make it easier to qualify for more properties.

What if you cannot get a 30-year fixed-rate mortgage?

I own 180k sqft rental properties and it is really hard for me to find fixed-rate mortgages. I use a local lender and they do not offer 30-year fixed-rate loans, only ARMs.

When I finance my rental properties, I use 30-year ARMs. An ARM is an adjustable-rate mortgage that has a fixed interest rate for a certain amount of time. The interest rate on an ARM can adjust up or down after the fixed time period is up. My portfolio lender offers 5 and 7-year ARMs with a 30-year amortization. The rate will stay the same for the 5 or 7-year term but can adjust after that term is up. There are limits on how much the rate can adjust each year and a ceiling that it can never go over. The great part about ARMs is they have a lower rate than a 30 year fixed rate loan and even the 15-year fixed-rate loan.

If you get an ARM for your rental properties you will have an even lower payment than a 30 year fixed rate loan and save money in interest costs over a 15-year fixed-rate loan. To me, it is the best of both worlds.

Why is an ARM less risky than you may think?

There are obviously some risks involved with an ARM because the rate can go up after 5 or 7 years. I always have plenty of reserves and cash flow to make sure I can afford the higher payment if the rates adjust. Even if I hold the loan well past the initial fixed-rate term, it takes a few years for the ARM to become more expensive than a fixed-rate mortgage. Chances are rents will increase in the time period as well. If you have enough cash flow and a plan for when rates could increase, you should have no problem with an ARM.

If you don’t have enough cash flow and your payments go up, you could get into trouble with an ARM. Negative cash flow is hard to sustain and it will make it harder to qualify for loans as well.

Many lenders will also only offer ARM loans after you have a certain number of mortgages in your name. I would suggest getting the fixed-rate mortgages when first starting out, and as you advance in your investing career look at the ARM option.

Why is a lower payment more important than a lower interest rate?

ARMs allow a small payment at the beginning of a loan and possibly a higher payment in the future. The nice thing about the lower payment is you have more cash flow and inflation comes into play when you are investing money. If you can pay less money now and more in the future it is a good thing, because inflation will make money worth less in the future. Even though your payment might go up on an ARM; 5 or 7 years later that money will be worth less and your rents could have gone up. If you use the money you save on an ARM to invest in more rental properties or something else with a decent return, you will be way ahead than if you had paid a higher payment with the 15 or 30-year fixed loan.

Why is a 30-year loan safer than a 15-year loan?

Many people have a tough time saving money and the higher your mortgage payment is, the harder it will be to save. Having an emergency fund is very important for financial stability. If you do not have an emergency fund, do not get a 15-year mortgage. Get the 3o-year mortgage, and save up for the emergency fund. Once the emergency fund has enough money (6 months of living expenses) you can pay off your mortgage early if you would like to.

Remember that you see no real benefit to paying off your mortgage early unless you pay off the entire loan, refinance, or sell. Your house payment will stay the same until the loan is paid off in full. If you need to access the equity you have in your house, you cannot ask the lender to give you back what you have paid early. You will have to sell the house or get a brand new loan (refinance or home equity line of credit).

If you get a 15-year loan and have a medical emergency, lose your job, or cannot work, the bank will not lower the payment for you. You have to keep paying that high mortgage payment every month. If you had a 30-year mortgage and were paying more to it every month, an emergency would not be nearly as devastating, because you could stop paying extra.

Does a 15-year or 30-year loan allow you to buy more rentals?

My goal is to buy as many rentals as I can. Not only do I want each rental to make as much money as possible, I want to buy a lot of them! The 30-year loan allows you to buy more rentals because you are making more money each month. If you take that money and reinvest it into more properties, the results are phenomenal.

My nephew, who is a math whiz, made this amazing graph. Here is how it was created:

  • Each rental has a $120k value and $1,200 a month rent. The house was bought 30 percent below market value. but we spent $10k on repairs and 20% on down payments. We also spent 4% on closing costs to buy.
  • Monthly costs are 1.5% for taxes and insurance, 8% for property management, 5% for vacancies, and 10% for maintenance.

The chart shows what happens when you buy 1 property with a 30-year loan and reinvest all the cash flow into buying more properties vs 1 property bought with a 15-year loan and reinvesting all cash flow into more properties. You buy 119 houses over 30 years with 30-year loans and 32 houses with 15-year loans. You are making $53k a month with 30-year loans vs $11k a month with 15-year loans.

This does not account for inflation! With inflation, the 30 year is even better because rents increase on more properties. You buy 147 houses vs 38. It may be tricky getting a 30-year loan on that many properties, but it shows the value of investing your money early on instead of paying off debt early.

Conclusion

On the surface, a 15-year fixed-rate mortgage may seem like the best way to go. It saves money on interest over the life of the loan and has a shorter term. I believe the 15-year loan is the worst choice because you are tying up your money, making it harder to qualify for loans, and you could be investing that money in something that gives a higher return. If you get a 30-year ARM, the interest rate will actually be lower than the 15-year loan, and you might be able to pay that loan off faster than the 15-year loan.

Build a Rental Property Empire

Categories Rental Properties

Source: investfourmore.com

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There are countless programs out there aimed at paying down the mortgage as quickly as possible, but they often highlight the interest savings without properly disclosing the risks involved.

While it may sound extremely enticing to pay down your mortgage in “half the time,” or “save $50,000” via some kind of payment accelerator, it doesn’t always work out exactly as planned. Or even close to it.

This harsh reality was revealed in a first person account over at the Yahoo! Contributor Network, in which Laura Quinn blamed her extra mortgage payments for getting her into even “deeper debt.”

Larger Mortgage Payments = More Debt

Ironically, extra payments to principal are intended to reduce debt and interest expense, but Quinn managed to accomplish the exact opposite.

While it sounds great on the surface, that money has to come from somewhere. And if it dries up your liquidity in the process, you could put yourself in a bind.

Quinn experienced this first hand after she and her husband set a lofty goal to pay off their mortgage by 2020.

When they first purchased their home in 2005, they had an initial monthly payment of $1,100 on a 30-year fixed, despite setting a goal to pay off the mortgage in 15 years by making payments of roughly $1,500.

Then they refinanced from a 30-year loan to a 15-year loan (at no cost), which increased their payment to $1,230. By the way, no cost loans mean higher interest rates, so another mistake was made here if their intention was to pay off the mortgage with the least amount of interest.

After that mortgage refinance, they refinanced again to lower their monthly payment to just $930, though they continued to pretend that they needed to pay $1,500 each month.

And if they ever experienced a windfall or came into some money, such as a tax refund, they’d throw that toward the mortgage balance one month early to ensure they could continue making the extra large payments if anything else came up.

Quinn seemed to be pretty happy with her progress back in late May of this year, and proclaimed that she and hubby couldn’t “wait to finally be free of our mortgage.”

Then the Unexpected Happened

As expected, something unexpected came along. They had some medical bills, and were forced to put $10,000 on a credit card while also taking out a $5,000 401(k) loan.

After all, she didn’t believe in maintaining an “emergency fund,” and was never good at setting aside cash for a rainy day, which she felt would just be a self-fulfilling prophecy.

For the record, the 15-year mortgage is set at a ridiculously low 2.75%, while the credit card’s APR is a much less attractive 15.24%. The 401(k) loan probably wasn’t cheap either, and it meant she couldn’t contribute to her retirement savings while paying it back.

Fortunately, she was able to pay off the 401(k) loan in one lump sum, and is now using the extra mortgage payment money to pay off the outstanding credit card debt.

So in essence, her quest to reduce her debt led to even more debt, despite holding a fixed-rate mortgage that could never surprise her.

[Do biweekly payments make sense?]

The New Goal Is to Set Aside Cash

As a result of her unfortunate series of events, Quinn has created a new goal to set aside $50,000 by the time the mortgage balance reaches $50,000.

The idea is that they’ll have cash on hand for any emergencies or unexpected costs, and save up enough to pay off the mortgage overnight if they feel like it. Still sounds like they can’t let that dream go.

Of course, first they have to tackle their credit card debt…

This personal story illustrates the risks involved with fixating oneself on paying down the mortgage.

Interestingly, the most unfortunate aspect of all of this is that it came at a time when mortgage rates were at record lows, meaning it’s the best time to hold a mortgage to term, not get rid of it.

Read more: Should you pay down your mortgage or invest instead?

Source: thetruthaboutmortgage.com