What one percentage point costs you
The same house, the same down payment, one different number.
On a $300,000 loan over 30 years, one percentage point of interest is worth about $202 a month and roughly $72,600 over the life of the loan. It is the single largest number in a mortgage that most people spend the least time on.
The same loan at three rates
A $300,000 30-year fixed loan, with nothing changed except the rate:
| Rate | Monthly P&I | Total interest |
|---|---|---|
| 5.52% | $1,707.13 | $314,568 |
| 6.52% | $1,900.15 | $384,055 |
| 7.52% | $2,101.75 | $456,631 |
Across that two-point spread the payment moves by $394.62 a month and total interest by $142,063 — on an identical house. Nothing about the property changed. Only the price of the money did.
The same payment buys a different house
Most buyers do not shop for a loan amount. They shop for a monthly payment. Framed that way, the rate quietly decides how much house you get. Holding principal and interest at about $1,900 a month:
| Rate | Loan supported |
|---|---|
| 5.52% | $333,920 |
| 6.52% | $300,000 |
| 7.52% | $271,224 |
Why the early years feel like nothing is happening
Interest accrues on the outstanding balance, and the balance is at its maximum on day one. On that $300,000 loan at 6.52%, the first twelve payments total about $22,800 — of which roughly $19,461 is interest and only $3,340 touches the principal.
That is not a penalty or a trick of the amortization schedule; it is just arithmetic on a large balance. The ratio improves every month, slowly at first and then noticeably. It is also why extra principal payments are so effective early: a dollar sent to principal in year one removes that dollar from every future interest calculation.
What this means in practice
- Shopping lenders is worth real money. Quotes vary by more than most people expect, and even a quarter point is meaningful at this scale — roughly $50 a month on a $300,000 loan.
- Your credit score has a dollar value. The rate tiers lenders offer are score-driven, which makes the gap between a good score and a great one measurable in exactly these terms.
- Discount points are a break-even question, not a good or bad one. Points cost cash now to reduce the rate later. Divide the up-front cost by the monthly savings to get the number of months to recover it — then ask honestly whether you will still hold the loan that long.
- A rate is not permanent. Refinancing exists, but it has costs of its own, and it depends on where rates go. Do not buy a payment you cannot carry on the assumption you will escape it later.
Model it with your own numbers
The figures above use a $300,000 loan and a 30-year term. Your loan size, term, and rate quotes will differ, and the effect scales with the balance.
You can change the rate and watch the payment, total interest, and amortization schedule move together, then model extra payments against it. If you are still working out a price range, how much house can you actually afford covers the 28/36 rule with worked numbers — and there is no sign-up for any of it.
CuraMoneta is an educational tool and does not provide financial, tax, or legal advice. Example rates bracket the 30-year fixed average as of June 13, 2026 (Freddie Mac).