Lower interest rates mean big savings

You already know that lower interest rates save you money, but do you know how much? Look at Table 3.6. See the striking difference in total interest costs between 15-year and 30-year loans. Also, recall that lenders sometimes charge about one-half percent less for 15-year rates. If, say,

Table 3.6 Total Interest Costs per $100,000 @ Selected Interest Rates

Monthly 1,5-Year Monthly 30-Year

Rate (%) Payment ($) (Total Interest, $) Payment ($) (Total Interest, $)

Table 3.6 Total Interest Costs per $100,000 @ Selected Interest Rates

Monthly 1,5-Year Monthly 30-Year

Rate (%) Payment ($) (Total Interest, $) Payment ($) (Total Interest, $)

4.0%

740

33,128

477

71,864

4.5

765

37,628

507

82,376

5.0

791

42,326

537

93,248

5.5

817

47,060

568

104,372

6.0

844

51,884

600

115,820

6.5

871

56,798

632

127,520

7.0

899

61,784

665

139,508

7.5

927

66,860

699

151,712

8.0

956

72,008

734

164,132

8.5

985

77,246

769

176,804

9.0

1,014

82,556

805

189,656

9.5

1,044

87,956

840

202,544

10.0

1,075

93,428

878

215,900

12.0

1,200

116,018

1,028

270,296

14.0

1,332

139,706

1,185

326,564

All figures are rounded.

All figures are rounded.

market rates were 6.0 percent (15-year) and 6.5 percent (30-year), the loans would cost $51,884 and $115,820, respectively—a savings of nearly $65,000 for the 15-year term (per each $100,000 borrowed). For a historical comparison of interest rates and maturity spreads, Google "Treasury yield curve."

Even when you compare the 15-year or 30-year terms at the same interest rate, you still might save a pile of $1,000 bills.

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