Save money with a more favorable interest rate.
When interest rates fall, homeowners flock to lenders to buy a mortgage that can save thousands of dollars during the term of the loan and could reduce monthly payments. Interest savings with a lower rate can be huge.
For example, in a 30-year mortgage with a 6.0% interest and monthly payments of $ 1,199, the borrower would pay about $ 14,388 per year on the loan. However, in a 30-year loan with a 5.5% rate and monthly payments of $ 1,136, the owner would pay only $ 13,632 per year, a savings of $ 63 per month, more than $ 750 per year.
For example, compare the monthly payments (for principal and interest) of a 30-year fixed-rate loan of $ 200,000 at 5.5% and 6.0%.