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Many steps go into the homebuying process, but one of the most important is accurate budget calculations. Without this, buyers could wind up getting rejected for offers on homes they want – or they could be accepted only to later determine that they can’t comfortably afford the monthly mortgage payments. It’s critical, then, to crunch the numbers in advance so that you know exactly what your payments will look like once you close on the home. In a normal rate climate, this can be relatively easy to complete. But in today’s evolving climate, it can be a bit more challenging.
That’s because mortgage interest rates are falling again after reaching their highest peak since 2000 last summer. And with the Federal Reserve now set to issue its first rate cut in four years, buyers are positioned to see some additional financial relief, perhaps as soon as this week. So it’s important for buyers to both calculate what their monthly mortgage payments will be at today’s rates as well as what they could look like after rate cuts. And with home prices rising and more homes worth $1 million or more in today’s market, many would benefit from calculating the costs of a $800,000 mortgage now. Below, we’ll do the math.
See how low of a mortgage rate you could lock in here now.
How much will a $800,000 mortgage cost monthly after rate cuts?
An $800,000 mortgage loan won’t be cheap. But the good news is that it will become more affordable for borrowers if a series of interest rate cuts are issued, as many expect to happen throughout the rest of 2024 and into 2025.
To start, here’s what an $800,000 mortgage would cost at today’s average rates, assuming the conventional 20% down payment ($160,000) for principal and interest only:
- 15-year mortgage at 5.78%: $5,324.91 per month
- 30-year mortgage at 6.41%: $4,007.43 per month
While today’s rates, depending on the lender, may already have a 25 basis point reduction priced in, it still helps to know what borrowers could expect once mortgage rates formally fall by the same increment:
- 15-year mortgage at 5.53%: $5,239.53 per month
- 30-year mortgage at 6.16%: $3,903.20 per month
And here’s what an $800,000 monthly mortgage payment would look like if today’s rates were half a percentage point lower (using the same caveats as noted above):
- 15-year mortgage at 5.28%: $5,154.92 per month
- 30-year mortgage at 5.91%: $3,800.17 per month
Optimistic that mortgage rates could fall even faster? While many experts don’t share that view, here’s what your payments could look like if rates eventually come down a full point lower than today’s averages:
- 15-year mortgage at 4.78%: $4,988.04 per month
- 30-year mortgage at 5.41%: $3,597.79 per month
So while you could potentially save hundreds of dollars each month by waiting for a full percentage point reduction, it may be better to act now, even if it means securing a slightly higher rate. Lower rates, after all, could attract more buyers and cause home prices to rise, quickly wiping out any savings secured with a lower rate.
See what mortgage interest rate you’re eligible for here.
Don’t forget other expenses
While the above monthly mortgage payments may seem manageable on the surface, it’s important to remember that they don’t account for homeowners insurance and taxes, two items which are often rolled into your monthly mortgage payment (assuming you don’t pay them annually). The above payments also don’t account for the private mortgage insurance (PMI) that you’ll need to account for if you pay less than the 20% down payment.
And those costs don’t incorporate mortgage points, which may be worth investigating, especially in today’s rate climate. So you’ll want to know what these costs are, too, and know which way you plan on paying them to more accurately determine exactly how much your monthly payment will be for this loan amount.
The bottom line
Mortgage payments on an $800,000 loan amount could be lower in the weeks and months to come and significantly lower if buyers wait until next year to act. However, waiting in today’s climate poses its own set of complications that will need to be addressed personally by each buyer. But if you can afford payments at today’s rates now — along with the costs of insurance, taxes and possible PMI and mortgage points — it may be beneficial to take action before additional buyers flood the market. That could cause home prices to rise and easily negate any rate savings you may have expected to earn by delaying.