Interest Rates sometimes get talked about in the news, but few people understand the powerful impact they can have on the monthly cost of your home and the total cost of your home.

Sure, you negotiate the price with the seller, but when you’re borrowing from a bank/lender, they get to determine the interest rate (measured as a percent) and that has a huge impact on the cost of your home.

Monthly Effect: The difference from 3% APR to 4% APR is 9% more each month on your mortgage. Maybe the extra $126/mo doesn’t feel like a lot, but it adds up.

Total Effect: The difference from 3% APR to 4% APR is more than $45,000 (on a $250K house) over the life of the loan. You’re paying 28% more because the lender said you have to pay a 1% higher interest rate.

The little things (like interest rate) matter a lot. And although we can’t always control what the economy is doing in terms of interest rates, we can control our personal credit score which helps us get the lowest possible APR on large purchases.

Assumptions:

• Purchase Price: $250,000
• Down Payment: 10% (or $25,000)
• Amount to Finance: 90% ($225,000)
• Loan Term: 30 Years