• Rebecca Richardson - Mortgage Consultant

Understanding Interest Rates 101


When getting a mortgage, we all know that the interest rate matters. As a reminder, the interest rate is basically the cost of borrowing money. It’s an added amount, in the form of a percentage, that you pay based on the amount you’re borrowing.



And in this post, we’re going to go over the differences between how a rate feels, as far as changes in the actual rate, versus how it translates into the payment.


The two main factors that impact your payment are your loan amount and interest rate.

Keep in mind, with the change in the loan amount, for every $10,000, your monthly payment changes by about $50.


On a larger scale, a loan amount of $100,000 at 2.75% is going to have a monthly payment of $408. And at $200,000, that goes up to $816 per month while at $300,000, the payment will be $1,225 a month.


So now that we know the difference between the changes in loan amounts, let’s go over how the interest rate will impact the monthly payment.


At $100,000 and 2.75%, the payment is $408. And if the rate goes up to 3%, then the payment increases to $422 and then if it increases to 3.25%, the payment will be $435. The jump from 2.75% to 3.25% absolutely feels significant because it does have an impact on the payment and the interest that you pay over time.


However, when you look at the difference in the payment going from $408 to $435, it’s less significant on your budget. It’s also important to keep in mind that you can lock your rate once you're under contract and typically once you're about 60 days from closing.

We work hard to offer our clients competitive rates and understand how important it is to get the best terms possible.


I want you to understand that the rate environment isn't something that we can control. So while you have other things to focus on, let me worry about your rate structure and give you advice on what the best strategy is to serve you now and in terms of your long-term financial plans.


If you have any additional questions about starting your home buying process, you can contact me by emailing (rebecca.richardson@wyndhamcapital.com) or finding me on Instagram (@the.mortgage.mentor).

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