This means that you can pay off your loan much faster. You may want to get a home loan now with the intention of refinancing the property at a later date, when market rates drop by a full percentage point or more, allowing you to reduce your mortgage payments by hundreds of dollars each month. In short, the difference between a 1% increase in mortgage rates could add up to tens of thousands of dollars in savings over the life of a 30-year loan. Once again, following the example above of Taylor buying a home (30-year FHA fixed mortgage, 20% down payment), you can get an idea of how much a 1% difference in interest savings can help.
As before, even a single percentage point drop in interest rates can help you save significantly on a 15-year mortgage. While it may not seem like a great benefit at first, a 1% difference in interest savings (or even a quarter or a half percent in mortgage interest rate savings) can save you thousands of dollars on a 15- or 30-year mortgage. Mortgage interest charges, which are described in the form of a percentage rate, effectively define the amount of fees charged by a financial lender to repay your loan. Based on previous examples, a one-point difference in mortgage interest saved can help you save significantly on monthly mortgage payments.
Below, you can get an idea of how much you can save given a 1% difference in interest saved on your 30-year mortgage.