The Cost Of an Extra 1% interest Rate

It's important to try to negotiate the lowest interest rate possible when applying for major loans like mortgages or auto loans. Look at the overall expense that one percentage point creates below:

Mortgage at 5%

On a 30 fixed loan, at 5% borrowing $200,000

Your total monthly payment will be: $1,073.00 for 30 years, which is based on a loan amount of $200,000.00 and an interest rate of 5%.

Your total payments for this loan term are, $386,280.00. The total cost of the interest payments for this loan term are $186,280.00.

Mortgage at 6%

On a 30 fixed loan, at 6% borrowing $200,000

Your total monthly payment will be: $1,199.00 for 30 years, which is based on a loan amount of $200,000.00 and an interest rate of 6%. Your total payments for this loan term are, $431,640.00. The total cost of the interest payments for this loan term are $231,640.00.

Summary

In the example above, the 5% loan saves $45,360 in total interest payment over the entire life of the loan. This really significant because all you need to do is have good credit to get the best rate. Here's a guide on how to acheive an over 700 credit rating which should make you a candidate for the lowest rates available. Achieve an over 700 credit score.