How Bad is a 7% Mortgage Rate When Buying a House?

The numbers are pretty horrifying

Foto de Kostiantyn Li en Unsplash

When I bought my house in 2014, my interest rate was 4.25%. When I refinanced in 2021, the rate dropped to 2.875%.

To say that interest rates have risen since then would be an understatement.

Here was what I found the last time I looked up the current rates:

Author’s screenshot of a Google search for “current mortgage rates”

The current rate on a 30-year fixed mortgage is well over 7% and closing in on 8%. That’s more than two and a half times what my mortgage rate was from less than three years ago.

But how bad is that really?

Pretty bad.

Let’s break down the numbers.

The impact of a 3% mortgage rate

There are three factors that determine how much interest you’ll pay on a mortgage:

• The amount of the loan
• The length of time it takes you to repay the loan
• The interest (APR) rate.

For this analysis, we’ll hold the first two constant at a $500,000 loan and a 30-year fixed rate…