When you’re buying a home on a tight budget, qualifying for the lowest mortgage rate becomes extremely important. The larger your loan, the greater the impact a difference in interest rates will have on your monthly payments.
For example, if you had a loan of $100,000, the monthly payments would rise by just $30 with an interest rate change from 4.5 percent to 5 percent. If your loan balance were $500,000, the difference in your payment under similar circumstances would be $151.
A lower mortgage rate also impacts the total amount of interest you will pay over the life of your loan. A $100,000 30-year fixed-rate loan at 5 percent requires $93,256 in interest payments; whereas an interest rate of 4.5 percent requires $82,407 in interest payments — a savings of $10,849 over the full length of the loan. Similarly, on a $500,000 loan you could save $54,245 in interest…
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