In this article, I will share how interest rate impacts your mortgage payment with a couple of examples.
| Annual Int Rate | House Price | Down Payment | Total payment to the bank | Interest Payment | Principle Payment |
| 7% | $500,000 | $100,000 | $958,036 | $558,036 | $400,000.00 |
| 3% | $500,000 | $100,000 | $607,110 | $207,110 | $400,000.00 |
The following table summarizes the interest payment for the first 2 years during mortgage payments, and you can see the impact of increased interest rate on the interest payment especially for the first 2 years.
| Annual Int Rate | Int Payment first 2 years | Principle Payment first 2 years | Monthly Mortgage |
| 7% | $23,518 | $16,956 | $2,661 |
| 3% | $55,449 | $8,421 | $1,686 |
The above table shows that as interest rate increases from 3% to 7% annually, the monthly mortgage payment that pays down the principle amount decreased from 42% to 13% for the first 2 years in a 30-year fixed mortgage loan. So, 87% of what we pay for the mortgage are for the interest when interest rate is 7% for the first 2 years.
Disclaimer: I am not a financial planner nor a lawyer. What I published here is for entertainment purpose only. Please do your own research for your financial/tax planning and investment.