The Cost of Borrowing

In April 2022, the average interest rate for a 30-year fixed mortgage surpassed 5% for the first time since April 2010, and it was still above 5% in August. With higher rates, it's more important than ever to understand how interest increases the total cost of a mortgage.

The chart below shows the total cost for a $400,000 conventional 30-year fixed mortgage and an accelerated 15-year fixed mortgage (typically used for refinancing) at different interest rates. A $400,000 mortgage would enable a buyer to purchase a $500,000 home with a 20% down payment.

Chart comparing 15 and 30 year mortgage cost.

Source: Freddie Mac, 2022. This hypothetical example of mathematical principles is used for illustrative purposes only. Actual results will vary. Prepared by Broadridge Advisor Solutions Copyright 2022.