If you got a mortgage in October, here's how much you'd be paying over 30 years

Buying a home is a big deal. Not only is it a major milestone, but it’s also a significant financial decision that can impact your budget for years to come. 

Regardless of the current mortgage rates, it may always feel surprising when you determine how much you could be paying in interest over the loan term. 

How much will you pay over a 30-year loan term?

The exact amount you’ll pay over the course of a 30-year loan term varies significantly based on each unique situation. But here’s an example of what you might pay. 

Let’s say that a buyer is purchasing a $400,000 home with a 20% down payment. They lock in a 6.92% interest rate, which is the average as of October 2022, according to Freddie Mac. With those numbers, the monthly mortgage payment might be $2,112. However, the monthly payment will likely be higher when home insurance and property tax costs are added in. 

Over the 30-year loan term, this buyer would pay $440,249  in interest payments. Ultimately, this leads to a total loan cost of $760,249. 

Extra payments can cut borrowing costs

As a homeowner, the thought of paying that much in interest costs might not sit well with you. The good news is that some mortgage lenders allow you to make extra payments along the way. 

If you are able to make extra payments of any kind, that can help you lower your overall borrowing costs. Here’s a look at two different strategies. 

Add to your mortgage payment each month

Let’s say that our homebuyer from above is able to add $100 to their mortgage payment each month. If all else remains the same, the homeowner would lower the total interest paid to $371,475 and the total cost of the loan to $691,475. 

Make one extra payment each year

Instead of making a larger mortgage payment each month, making one extra payment per year might be an option for some borrowers. Let’s continue with the example from above. If the homeowner makes a $1,500 lump sum payment each January, they’ll cut their total interest paid to $355,944 and the total cost of the loan to $675,944. 

With either strategy, homeowners have a chance to pursue a lower total interest cost for the loan. But before you commit to extra payments, confirm with your lender that the extra funds will be applied to the principal balance. Some lenders may charge you a fee, known as a prepayment fee, for paying off your loan early, so realize that every situation will vary.

This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.