At today’s mortgage rates, the typical homebuyer will pay more in interest over 30 years than the home’s purchase price, according to a new analysis.
A buyer putting 20% down on the median-priced U.S. home would pay about $413,700 in interest over a 30-year mortgage at today’s average rate of 6.53%.
That total is about $10,500 more than the home’s purchase price, meaning borrowers would pay an extra 102.6% of the home’s value in interest over the life of the loan. High mortgage rates continue to weigh on affordability, even as home price growth has slowed in many markets.
For comparison, financing today’s median-priced home at the 2021 average mortgage rate of 2.96% would cut lifetime interest by $249,188 and lower monthly payments by about $692.
The example shows how sharply lifetime borrowing costs respond to rate changes: a one-point increase in the average 30-year rate, to 7.53%, would add $78,066 in interest for the typical borrower.
Down payment size also matters. Borrowers who put down the FHA minimum of 3.5%, rather than 20%, would pay an additional $85,326 in lifetime interest, along with monthly mortgage insurance costs.
Current homeowners are affected, too. Many who bought or refinanced in 2021 or earlier, locking in rates below 4%, are reluctant to move because buying another home today could mean taking on a rate 2 to 3 percentage points higher. As a result, they are effectively locked in by their low rates and often choose to stay put.
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