How Much Does a 1-Point Drop in Mortgage Rate Save?
On a $400,000 30-year loan, going from 7% to 6% lowers the payment by about $263 a month and saves roughly $95,000 over the life of the loan. Here's the math at several rates.
Quick answer
On a hypothetical $400,000, 30-year fixed loan, dropping from 7% to 6% lowers principal and interest by about $263 a month, or about $94,700 over 30 years.
Payment by rate
| Rate | Monthly principal and interest |
|---|---|
| 5% | $2,147.29 |
| 6% | $2,398.20 |
| 7% | $2,661.21 |
| 8% | $2,935.06 |
Show the numbers behind this chart
| Principal and interest | |
|---|---|
| 5% | $2,147 |
| 6% | $2,398 |
| 7% | $2,661 |
| 8% | $2,935 |
Each 1-point step changes the payment by roughly $250 to $275 a month at these rates.
Ways to get a lower rate
- Improve your credit before applying; see raising your score before a mortgage.
- Compare several lenders' Loan Estimates.
- Buy points if you'll keep the loan long enough; see mortgage points.
- Refinance later if rates fall; see when refinancing pays.
The takeaway
A single percentage point on a large mortgage is worth hundreds of dollars a month and tens of thousands over the loan. It's worth shopping hard for.
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