Here's a sentence that belongs on a billboard outside every real estate office: the difference between a 4% mortgage and a 6% mortgage on a $400,000 loan is roughly $140,000.
Not $140,000 in some abstract 'over the lifetime of the loan' sense that nobody actually visualises. $140,000 in real money. More than a down payment on a second home. Enough to retire two years earlier. Enough to put two children through state university.
And it all comes down to a number most buyers glance at for about four seconds before signing.
The table that should come with a warning
A $400,000 repayment mortgage over 25 years. Principal and interest. Monthly payment on the left, what you actually hand over by the end on the right.
| Rate | Monthly payment | Total repaid | Total interest |
|---|---|---|---|
| 4.0% | $2,111 | $633,300 | $233,300 |
| 4.5% | $2,223 | $666,900 | $266,900 |
| 5.0% | $2,338 | $701,400 | $301,400 |
| 5.5% | $2,457 | $737,100 | $337,100 |
| 6.0% | $2,577 | $773,100 | $373,100 |
| 7.0% | $2,827 | $848,100 | $448,100 |
Read the top row and the sixth row together. Same house. Same 25 years. Same $400,000 borrowed.
What rates actually look like right now
As of late 2026, the US 30-year fixed mortgage rate is sitting above 7% — the highest level since 2007. The 10-year Treasury yield broke above 5% for the first time in over a decade, and mortgage rates have followed.
Compare that to the sub-4% rates that dominated 2020 and 2021. A buyer who locked in at 3.5% on a $400,000 mortgage is paying roughly $2,002 a month. A buyer today at 7% is paying $2,827. That's $825 more per month — nearly $10,000 a year — for the exact same loan.
Why does one percentage point cost so much?
It's not a trick. It's arithmetic.
When you borrow at 4%, the bank charges you $4 a year for every $100 you owe. At 6%, it charges $6. On a $400,000 balance, that's $8,000 extra in the first year alone — before you've paid back a single dollar of the original loan.
And because mortgage interest compounds against the outstanding balance, the higher rate keeps costing more every year until the balance finally falls. In the early years of a 25-year mortgage, almost your entire payment goes to interest. The principal barely moves. A higher rate means you spend longer in that phase — more of your money feeding the bank, less building your own equity.
The chart below shows the split for a typical 25-year mortgage. Notice how little principal you repay in the first five years.
Every percentage point of rate pushes more of your early payments toward interest and less toward actually owning the house. That's why the rate is the single biggest lever in the whole calculation — bigger than the term, bigger than the deposit, bigger than almost anything else you can control.
The 4% mortgage was never normal
Here's the part nobody wants to hear: the 4% mortgage was the anomaly.
If you bought a home between 2009 and 2021, you probably think 4% is what a mortgage 'should' cost. But that period was the lowest sustained interest rate environment in modern history. Central banks had slashed rates to near-zero after the financial crisis and kept them there for over a decade.
Go back further. In the 1980s, US mortgage rates were regularly above 12%. In the 1990s, they hovered around 8%. The 4% era was a historical gift — one that a whole generation of buyers started treating as the default.
| Era | Typical US mortgage rate | Monthly payment on $400,000 |
|---|---|---|
| Early 1980s | ~13% | $4,464 |
| 1990s | ~8% | $3,086 |
| 2010s | ~4% | $2,111 |
| 2020–2021 | ~3% | $1,897 |
| 2026 today | ~7% | $2,827 |
Current rates aren't high by historical standards. They're just not the gift anymore. And the shock of the transition — from 4% to nearly 7% — is what's freezing housing markets on both sides of the Atlantic right now.
So what do you actually do?
Nothing about the rate changes the maths of the house itself. You still need to live somewhere. The mortgage is still cheaper than 25 years of rent in most markets. But three things matter more than they did in 2021.
1. Your deposit matters more than ever
A bigger deposit means a smaller loan, and a smaller loan means the rate hurts less. At 6%, every $10,000 you don't borrow saves you roughly $64 a month — about $19,300 over the life of the loan.
2. The term is your friend again
Stretching from 25 to 30 years lowers the monthly payment by about $250 on a $400,000 loan at 6% — from $2,577 to $2,398. You'll pay more interest overall, but you'll sleep better tonight.
| Term | Monthly payment at 6% | Total interest |
|---|---|---|
| 20 years | $2,866 | $287,900 |
| 25 years | $2,577 | $373,100 |
| 30 years | $2,398 | $463,400 |
3. Overpayments are the silent weapon
Every extra $200 a month on a $400,000 mortgage at 6% cuts roughly three to four years off the term and saves around $65,000 in interest. You don't need a lower rate if you can attack the balance directly.
Run your own numbers
The figures above are illustrative. Your rate, your deposit, your term, and your overpayment strategy all change the outcome. The calculator below runs your actual scenario — monthly payment, total interest, full amortization schedule, and what happens if you pay a little extra each month.
Try it live
Change the rate and watch the monthly payment, total interest, and amortization schedule move in real time.
Mortgage Calculator
See the full monthly cost of a home — principal, interest, property tax, insurance and HOA — plus how the balance falls year by year.
Your numbers
= $0 down, $0 borrowed
Taxes, insurance & fees (optional)Excluded
Property tax rules differ by country and region. Leave this closed for a pure principal-and-interest figure, or open it and enter your local numbers.
Your figures stay in this browser tab only — nothing is saved or sent anywhere.
Enter your numbers and click Calculate to see your results
Estimates only. Does not include closing costs, PMI, or lender-specific fees. Consult a licensed mortgage professional for an actual quote.
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Payment breakdown & loan balance
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About this calculator
A mortgage payment is rarely just the loan. Lenders escrow property taxes and homeowners insurance alongside principal and interest, and if the property sits in an association there is an HOA fee on top. Budgeting from a principal-and-interest quote alone is the most common way buyers end up stretched, which is why this calculator shows the combined number first.
The loan portion itself uses the same amortization mathematics as any instalment loan: interest accrues monthly on the outstanding balance and the remainder of the payment retires principal. Over a thirty-year term that ordering matters enormously. In the first decade the balance barely moves; in the final decade it collapses. The yearly table above quantifies that curve so you can see how much equity you would actually hold if you sold early.
Down payment size does two things at once: it reduces the amount borrowed and, once you pass roughly twenty percent, it typically removes private mortgage insurance. Rate matters too — a single percentage point on a large balance can be worth six figures across the full term. Adjust the rate and down payment sliders together to see which lever moves your situation more.
Lenders typically cap borrowing at a debt-to-income ratio, so paying off other loans can matter as much as a bigger down payment. Points and buydowns trade upfront cash for a lower rate — worth it only if you keep the loan long enough to recoup the cost. And remember that adjustable rates can reset upward after the fixed period ends.
Read how the mortgage payment formula actually works, step by step →
FAQ
What does this mortgage calculator include?
It combines principal and interest with monthly property tax, homeowners insurance and any HOA fee, so the headline figure is closer to what actually leaves your bank account each month than a bare principal-and-interest quote.
Is PMI or mortgage insurance included?
No. Private mortgage insurance, closing costs, points and lender-specific fees are excluded. If your down payment is under 20% you should expect an extra monthly premium on top of the figure shown here.
Why is so much of my early payment interest?
Interest is charged on the outstanding balance, which is at its largest at the start. The yearly amortization table shows how the principal share grows every year while the interest share falls.
What is in the Excel export?
A yearly amortization sheet with principal paid, interest paid and ending balance for each year, plus a summary sheet listing your inputs and the full monthly payment breakdown.
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Open calculatorEducational information only. This article explains how a mechanism works. It isn't financial advice, a recommendation, or a plan tailored to your situation. Speak with a licensed professional before making any financial decision.