Understanding the Monthly Cost of a $1 Million Mortgage After Expected Rate Cuts

How Much Will a $1 Million Mortgage Cost Per Month After Rate Cuts?

As mortgage interest rates have dipped by over a full percentage point recently, homebuyers are eager to know how much a $1 million mortgage will cost per month after these cuts. With the Federal Reserve poised to implement its first funds rate cut since 2020, potential savings loom large for prospective buyers.

Current Monthly Payments

Understandably, examining current monthly payments for a $1 million mortgage is essential. For qualified borrowers making a conventional 20% down payment of $200,000, here are the average monthly payments based on different loan terms:

• 15-Year Mortgage at 5.78%: $6,656.14 per month
• 30-Year Mortgage at 6.41%: $5,009.29 per month

Projected Payments After Rate Cuts

As rates are expected to fall in the coming months, here’s what the payments could look like:

1. With a 0.25% Rate Reduction:
• 15-Year Mortgage at 5.53%: $6,549.41 per month
• 30-Year Mortgage at 6.16%: $4,879.01 per month
2. With a 0.50% Rate Reduction:
• 15-Year Mortgage at 5.28%: $6,443.65 per month
• 30-Year Mortgage at 5.91%: $4,750.21 per month
3. With a 1.00% Rate Reduction:
• 15-Year Mortgage at 4.78%: $6,235.05 per month
• 30-Year Mortgage at 5.41%: $4,497.24 per month

Homebuyers who consider waiting for these rate cuts could see significant monthly savings. However, this strategy comes with risks, as decreased rates may lead to increased buyer competition and higher home prices, which could ultimately negate savings.

The Bottom Line

Analyzing the monthly cost of a $1 million mortgage reveals that borrowers will need to budget over $6,500 or $5,000 each month now, depending on the mortgage term. Though potential rate cuts promise lower payments, they may also complicate the home buying process. Carefully evaluate your options and crunch the numbers.